BUS 100 Midterm Study Guide PDF

BUS 100 Midterm Study Guide Chapter 1 Free enterprise: the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it Business: the organized effort of individuals to produce and sell, for a profit, the goods and...

BUS 100 Midterm Study Guide Chapter 1 Free enterprise: the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it Business: the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs The organized effort of individuals ○ Material resources - the raw materials used in manufacturing processes, as well as buildings and machinery ○ Human resources - the people who furnish their labor to the business in return for wages ○ Financial resources - the money required to pay employees, purchase materials, and generally keep the business operating ○ Informational resources - information that tells the managers of the business how effectively the other three resources are being combined and used e-business*: The organized effort of individuals to produce and sell for a profit, the goods and services that satisfy society’s needs through the facilities available on the internet Profit*: What remains after all business expenses have been deducted from sales revenue Stakeholders*: All the different people or groups of people who are affected by an organization’s policies, decisions, and activities Basic assumptions of adam smith's laissez faire capitalism ○ Right to create wealth ○ Right to own private property and resources ○ Right to economic freedom and freedom to compete ○ Right to limited government intervention Mixed economy*: An economy that exhibits elements of both capitalism and socialism Economics*: The study of how wealth is created and distributed Today, experts often study economic problems from two different perspectives: ○ Microeconomics*: The study of the decisions made by individuals and businesses ○ Macroeconomics*: The study of the national economy and the global economy Economy*: The way in which people deal with the creation and distribution of wealth Factors of production*: Inputs and resources used to produce goods and services Entrepreneur*: A person who risks time, effort, and money to start and operate a business Invisible hand*: A term created by Adam Smith to describe how an individual’s own personal gain benefits others and a nation’s economy Laissez-faire*: Implies that there should be no government interference in the economy Market economy*: An economic system in which businesses and individuals decide what to produce and buy, and the market determines prices and quantities sold (also known as a free-market economy) Basic assumptions of adam smith:  ○ Right to create wealth ○ Right to own private property and resources ○ Right to economic freedom and freedom to compete ○ Right to limited government intervention Mixed economy*: An economy that exhibits elements of both capitalism and socialism Command economy*: An economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production Consumer price index (CPI)*: A monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area Producer price index (PPI)*: A monthly index that measures prices that producers receive for their finished goods Depression*: A severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession (part of the business cycle ○ 1929 stock market crash ○ federal government involvement in business in order to stimulate the economy, reduce unemployment and to ease problems during great depression ○ Economic growth and higher standard of living during 1950s-60s ○ High inflation, high interest rates, reduced business profits in last part of 1970s and early 1980s Chapter 2 Ethics: the study of right and wrong and of the morality of the choices individuals make Business ethics: the application of moral standards to business situations Sarbanes-Oxley Act of 2002*: Provides sweeping legal protection for employees who report corporate misconduct ○ The Sarbanes-Oxley Act of 2002 protects whistle-blowers who report corporate misconduct Codes of ethics are perhaps the most effective way to encourage ethical behavior ○ Code of ethics*: A guide to acceptable and ethical behavior as defined by the organization Whistle-blowing*: Informing the press or government officials about unethical practices within one’s organization Social responsibility: the recognition that business activities have an impact on society and the consideration of that impact in business decision making Caveat emptor*: A Latin phrase meaning “let the buyer beware” (a doctrine consumers generally were subject to) The stock market collapse (October 29, 1929) triggered the Great Depression, and public pressure mounted for the government to “do something” about the economy and worsening social conditions Soon after Franklin D. Roosevelt became president in 1933, he instituted programs to restore the economy and improve social conditions  Economic model of social responsibility*: The view that society will benefit most when business is left alone to produce and market profitable products that society needs Socioeconomic model of social responsibility*: The concept that business should emphasize not only profits but also the impact of its decisions on society Consumerism*: All activities undertaken to protect the rights of consumers The basic rights of consumers ○ Right to safety ○ Right to be informed ○ Right to choose ○ Right to be heard ○ Right to consumer education ○ Right to service Affirmative action program*: A plan designed to increase the number of employees from underrepresented groups at all levels within an organization Equal Employment Opportunity Commission (EEOC)*: A government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it Pollution*: The contamination of water, air, or land through the actions of people in an industrialized society ○ Largest percentage of environmental crimes are NOT air-related Green marketing*: The process of creating, making, delivering, and promoting products that are environmentally safe Social responsibility programs: In most cases, developing and implementing an effective program for social responsibility will require four steps: ○ Securing the commitment of top executives ○ Planning ○ Appointing a director ○ Preparing a social audit*: A comprehensive report of what an organization has done and is doing with regard to social issues that affect it ○ Commitment of employees is desired but not one of the steps Chapter 3 International business*: all business activities that involve exchanges across national boundaries Absolute advantage*: the ability to produce a specific product more efficiently than any other nation Comparative advantage*: the ability to produce a specific product more efficiently than any other product Exporting*: selling and shipping raw materials or products to other nations Importing*: purchasing raw materials or products in other nations and bringing them into one’s own country Balance of trade*: the total value of a nation's exports minus the total value of its imports over a specified period of time ○ Trade deficit*: a negative balance of trade  Balance of payments*: the total flow of money into a country minus the total flow of money out of that country over a specified period of time Trading company*: provides a link between buyers and sellers in different countries Countertrade*: an international barter transaction Licensing*: a contractual agreement in which one firm permits another to produce and market its product and to use its brand name in return for a royalty or other compensation franchise*: a license to operate individually owned business as though it were part of a chain of outlets or stores Franchising*: the actual granting of a franchise Advantages of franchising to the franchisor: ○ Gains fast and well-controlled distribution of its own products without high cost of manufacturing and operating own outlets ○ More capital available to expand product & for advertising ○ Can ensure outlets are maintained and operating according to own standards ○ Highly motivated to succeed which means more sales and more royalties for franchisor Advantages of franchising to the franchisee ○ Opportunity to start business with limited capital and use business experience of others ○ Receives advice from franchisor free of charge ○ Materials to use in local advertising ○ Minimize cost of advertising, supplies and business necessities by purchasing them with other franchisees Outsourcing*: An arrangement in which one firm contracts manufacturing or other activities to a firm in another country that specializes in those activities and can offer them at a lower cost than domestic firms Joint venture: a partnership formed to achieve a specific goal or to operate for a specific period of time Multinational corporation*: A firm that operates on a worldwide scale without ties to any specific nation or region Tariff*: A tax levied on a particular foreign product entering a country Dumping*: Exportation of large quantities of a product at a price lower than that of the same product in the home market Nontariff barrier: a nontax measure imposed by a government to favor domestic over foreign suppliers Embargo*: A complete halt to trading with a particular nation or of a particular product Currency devaluation*: The reduction of the value of a nation’s currency relative to the currencies of other countries Exchange control*: A restriction on the amount of a particular foreign currency that can be purchased or sold General Agreement on Tariffs and Trade (GATT)*: An international organization of 164 nations dedicated to reducing or eliminating tariffs and other barriers to world trade  Economic community*: An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies Export-Import Bank of the United States*: An independent agency of the U.S. government whose function is to assist in financing the exports of American firms Multilateral development bank (MDB)*: An internationally supported bank that provides loans to developing countries to help them grow International Monetary Fund (IMF)*: An international bank that makes short-term loans to developing countries experiencing balance-of-payment deficits Chapter 4 Sole proprietorship*: A business that is owned (and usually operated) by one person ○ Advantages: Ease of start-up and closure Pride of ownership Retention of all profits No special taxes Being your own boss ○ Disadvantages Unlimited liability Lack of continuity Lack of money Limited management skills Difficulty hiring employees Types of Partners ○ General partner*: A person who assumes full or shared responsibility for operating a business ○ Limited partner*: A person who invests money in a business but has no management responsibility or responsibility or liability for losses beyond the amount they invested in the partnership Stock*: The shares of ownership of a corporation Stockholder*: A person who owns a corporation’s stock Closed corporation* (sometimes referred to as a private corporation): A corporation whose stock is owned by relatively few people and is not sold to the general public Open corporation* (sometimes referred to as a public corporation): A corporation whose stock can be bought and sold by any individual Foreign corporation*: A corporation in any state in which it does business except the one in which it is incorporated Alien corporation*: A corporation chartered by a foreign government and conducting business in the United States  Articles of incorporation (often called a corporate charter): A contract between a corporation and the state in which the state recognizes the formation of the artificial person that is the corporation Common stock*: The most basic form of corporate ownership and whose owners may vote on corporate policies Preferred stock*: Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common-stock owners Dividend*: A distribution of earnings to the stockholders of a corporation Proxy*: A legal form listing issues to be decided at a stockholders’ meeting and enabling stockholders to transfer their voting rights to some other individual or individuals Merger*: The combining of two corporations or other business entities to form one business ○ Hostile takeover*: A situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger ○ An acquisition is essentially the same thing as a merger, but the term generally is used to reference to a large corporation’s purchases of other corporations Chapter 5 Small business - one that is independently owned and operated for profit and is not dominant in its field ○ Providing competition Small businesses challenge larger, established firms to become more efficient and more responsive to consumer needs ○ Filling the needs of society and other businesses Small firms provide a variety of goods and services to consumers, to each other, and to much larger firms SBA management assistance ○ The SBA’s management assistance includes free individual counseling, courses, conferences, workshops, and a wide range of publications ○ Management courses and workshops cover all the functions, duties, and roles of managers Small business institutes (SBIs): ○ groups of senior and graduate students in business administration who provide management counseling to small businesses Small business development centers (SBDCs): ○ university based groups that provide individual counseling and practical training to owners of small businesses SBA financial assistance ○ The SBA offers special financial-assistance programs to finance increased operations during peak selling seasons, to pay for required pollution control equipment, to finance an expansion, or to mop up after a natural disaster such as a flood or a terrorist attack ○ Most of the SBA’s business loans are made by private lenders such as banks, but the agency partially guarantees repayment Business plan - a carefully constructed guide for the person starting a business Chapter 6 Management*: The process of coordinating people and other resources to achieve the goals of an organization Planning*: Establishing organizational goals and deciding how to accomplish them Mission*: A statement of the basic purpose that makes an organization different from others Strategic planning process*: The establishment of an organization’s major goals and objectives and the allocation of resources to achieve them Goal*: An end result that an organization is expected to achieve over a one- to ten-year period Objective*: A specific statement detailing what an organization intends to accomplish over a shorter period of time SWOT analysis*: The identification and evaluation of a firm’s strengths, weaknesses, opportunities, and threats Strategic plan*: An organization’s broadest plan, developed as a guide for major policy setting and decision making ○ Broad guide for major policy setting ○ Designed to achieve long-term goals ○ Set by board of directors and top management Operational plan*: A type of plan designed to implement tactical plans Tactical plan*: A smaller-scale plan developed to implement a strategy ○ Smaller scale plan to implement strategic plan ○ May be updated periodically ○ Easier to change than strategic plans Contingency plan*: A plan that outlines alternative courses of action that may be taken if an organization’s other plans are disrupted or become ineffective Organizing*: The grouping of resources and activities to accomplish some end result in an efficient and effective manner Top manager: An upper-level executive who guides and controls the overall fortunes of an organization Middle manager*: A manager who implements the strategy and major policies developed by top management First-line manager*: A manager who coordinates and supervises the activities of operating employees Conceptual skills*: The ability to think in abstract terms Analytic skills*: The ability to identify problems correctly, generate reasonable alternatives, and select the “best” alternatives to solve problems Interpersonal skills*: The ability to deal effectively with other people Technical skills*: Specific skills needed to accomplish a specialized activity Communication skills*: The ability to speak, listen, and write effectively Formal leaders: Have legitimate power of position, as well as authority within an organization to influence others to work toward the organization’s objectives  Informal leaders: Do not have authority to influence others to work toward the organization’s objectives and may or may not exert their influence in support of the organization Autocratic leadership*: Task-oriented leadership style in which workers are told what to do and how to accomplish it without having a say in the decision-making process Participative leadership*: Leadership style in which all members of a team are involved in identifying essential goals and developing strategies to reach those goals Laissez-faire leadership*: A hands-off leadership style that provides direction, tools, and resources to employees while delegating responsibility and decision-making authority to them Transformational leadership*: Leadership style that focuses on transforming organizations and industries Transactional leadership*: Leadership style that emphasizes structure, performance and productivity, and reward systems Charismatic leadership*: Personality-dependent leadership style Span of management (or span of control)*: The number of workers who report directly to one manager Steps in the delegation process ○ Manager assign responsibilities, then grant authority, then assign accountability to worker ○ Delegation*: Assigning part of a manager’s work and power to other workers ○ Responsibility*: The duty to do a job or perform a task ○ Authority*: The power, within an organization, to accomplish an assigned job or task ○ Accountability*: The obligation of a worker to accomplish an assigned job or task Grapevine*: The informal communications network within an organization Benchmarking: A process of comparing the way a firm produces products or services to the methods used by organizations known to be leaders in an industry in order to determine the “best practices” that can be used to improve quality Bill of lading: After signing contracts, the importer will ask its local bank to issue a letter of credit for the funds needed to pay for the merchandise. The transporter of the merchandise provides the exporter evidence of the shipment via a bill of lading. The exporter signs over title to the merchandise and issues a draft from its bank, which orders the importer’s bank to pay for the merchandise.