Midterm Business PDF

Business – Any profit-seeking organization that provides goods and services designed to satisfy the customers’ needs Revenue – Money that a company brings in through the sale of goods and services Business model – A concise description of ho...

Business – Any profit-seeking organization that provides goods and services designed to satisfy the customers’ needs Revenue – Money that a company brings in through the sale of goods and services Business model – A concise description of how a business intends to generate revenue Profit – Money left over after all the costs involved in doing business have been deducted from the revenue Competitive advantage – Some aspect of a product or company that makes it more appealing to its target customers – One of the beauties of a free-market economy is that companies usually have a lot of flexibility in deciding which customers they want to focus on and how they want to compete. – Each company seeks a competitive advantage that makes its products more appealing to its chosen customers. Consumers benefit from better products and more choices, and companies get to focus on what they do best. Not-for-profit organizations – Organizations that provide goods and services without having a profit motive; these are also called nonprofit organizations Goods-producing businesses – Companies that create value by making “things,” most of which are tangible Service businesses – Companies that create value by performing activities that deliver some benefit to customers Risk and Reward – Goods-producing businesses are often capital-intensive businesses – Service businesses tend to be labor-intensive businesses  Barrier to entry – Any resource or capability a company must have before it can start competing in a given market Business mindset – A view of business that considers the myriad decisions that must be made and the many problems that must be overcome before companies can deliver the products that satisfy customer needs Social environment – Trends and forces in society at large Stakeholders – Internal and external groups affected by a company’s decisions and activities Multiple Environments of Business Technological environment – Forces resulting from the practical application of science to innovations, products, and processes Disruptive technologies – Those that fundamentally change the nature of an industry – Can be powerful enough to create or destroy entire companies Economic environment – The conditions and forces that affect the cost and availability of goods, services, and labor and thereby shape the behavior of buyers and sellers Legal and regulatory environment – Laws and regulations at local, state, national, and even international levels Market environment – A company’s target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers Research and development (R&D) – Functional area responsible for conceiving and designing new products Information technology (IT) – Systems that promote communication and information usage through the company, or that allow companies to offer new services to their customers  Manufacturing, production, or operations – An area where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses) – Purchasing, logistics, facilities management Marketing – Charged with identifying opportunities in the marketplace – Working with R&D to develop the products to address those opportunities – Creating branding and advertising strategies to communicate with potential customers, and setting prices Finance and accounting – Responsible for virtually every aspect of a firm’s finances – Ensuring that the company has the funds it needs to operate – Monitoring and controlling how those funds are spent – Drafting reports for company management and outside audiences such as investors and government regulators Human resources (HR) – Responsible for recruiting, hiring, developing, and supporting employees Professionalism – The quality of performing at a high level and conducting oneself with purpose and pride Economy – The sum total of all the economic activity within a given region Economics – The study of how a society uses its scarce resources to produce and distribute goods and services Microeconomics – The study of how consumers, businesses, and industries collectively determine the quantity of goods and services demanded and supplied at different prices Macroeconomics – The study of “big picture” issues in an economy, including competitive behavior among firms, the effect of government policies, and overall resource allocation issues  Natural resources – Land, forests, minerals, water, and other tangible assets usable in their natural state Human resources – All the people who work in an organization or on its behalf Capital – The funds that finance the operations of a business as well as the physical, human- made elements used to produce goods and services, such as factories and computers Entrepreneurship – The combination of innovation, initiative, and willingness to take the risks required to create and operate new businesses Knowledge – Expertise gained through experience or association Scarcity – A condition of any productive resource that has finite supply Opportunity cost – The value of the most appealing alternative not chosen Economic system – The policies that define a society’s particular economic structure; the rules by which a society allocates economic resources – Free-market, planned Free-market system – An economic system in which decisions about what to produce and in what quantities are decided by the market’s buyers and sellers Capitalism – Economic system based on economic freedom and competition Planned system – Economic system in which the government controls most of the factors of production and regulates their allocation Socialism – Economic system characterized by public ownership and operation of key industries combined with private ownership and operation of less-vital industries  Nationalization – A government’s takeover of selected companies or industries Privatization – Turning over services once performed by the government and allowing private businesses to perform them instead Demand – Buyers’ willingness and ability to purchase products at various price points Supply – A specific quantity of a product that the seller is able and willing to provide at various prices Competition – Rivalry among businesses for the same customers Pure competition – A situation in which so many buyers and sellers exist that no single buyer or seller can individually influence market prices Monopoly – A situation in which one company dominates a market to the degree that it can control prices Monopolistic competition – A situation in which many sellers differentiate their products from those of competitors in at least some small way Oligopoly – A market situation in which a very small number of suppliers, sometimes only two, provide a particular good or service Recession – A period during which national income, employment, and production all fall; defined as at least six months of decline in the GDP Business cycles – Fluctuations in the rate of growth that an economy experiences over a period of several years Unemployment rate  – The portion of the labor force (everyone over 16 who has or is looking for a job) currently without a job Inflation – An economic condition in which prices rise steadily throughout the economy Deflation – An economic condition in which prices fall steadily throughout the economy Government’s Role in a Free-Market System – Protecting stakeholders – Fostering competition – Encouraging innovation and economic development – Stabilizing and stimulating the economy Regulation – Relying more on laws and policies than on market forces to govern economic activity Deregulation – Removing regulations to allow the market to prevent excesses and correct itself over time Gross domestic product (GDP) – The value of all the final goods and services produced by businesses located within a nation’s borders; excludes outputs from overseas operations of domestic companies Ethics – The rules or standards governing the conduct of a person or group Transparency – The degree to which affected parties can observe relevant aspects of transactions or decisions Insider trading – The use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market Ethical Behavior – Competing fairly and honestly – Communicating truthfully  – Being transparent – Not causing harm to others Factors Influencing Ethical Behavior – Cultural differences – Knowledge – Organizational behavior Code of ethics – A written statement that sets forth the principles that guide an organization’s decisions Whistle-blowing – The disclosure of information by a company insider that exposes illegal or unethical behavior by others within the organization Ethical lapse – A situation in which an individual or a group makes a decision that is morally wrong, illegal, or unethical Ethical dilemma – A situation in which more than one side of an issue can be supported with valid arguments Finding the Right Answer When Faced with an Ethical Dilemma – Make sure you frame the situation accurately, taking into account all relevant issues and questions. – Identify all parties who might be affected by your decision. – Be as objective as possible. – Don’t assume that other people think the way you do. – Watch out for conflicts of interest. – Conflict of interest is a situation in which competing loyalties can lead to ethical lapses, such as when a business decision may be influenced by the potential for personal gain Corporate social responsibility (CSR) – The idea that business has obligations to society beyond the pursuit of profits The Relationship between Business and Society  – Consumers in contemporary societies enjoy and expect a wide range of benefits, from education and healthcare to credit and products that are safe to use. – Profit-seeking companies are the economic engine that powers modern society; they generate the vast majority of the money in a nation’s economy. – Much of what we consider when assessing a society’s standard of living involves goods and services created by profit-seeking companies. – Companies cannot hope to operate profitably without the many benefits provided by a stable, functioning society. Philanthropy – The donation of money, time, goods, or services to charitable, humanitarian, or educational institutions Strategic CSR – Social contributions that are directly aligned with a company’s overall business strategy Sustainable development – Operating business in a manner that minimizes pollution and resource depletion, ensuring that future generations will have vital resources Consumerism – A movement that pressures businesses to consider consumer needs and interests Identity theft – A crime in which thieves steal personal information and use it to take out loans and commit other types of fraud CSR: Consumers – The right to buy safe products – and to buy them safely – The right to be informed – The right to choose which products to buy – The right to be heard Small business – A company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry) Economic Roles of Small Business – They provide jobs.  – They introduce new products. – They meet the needs of larger organizations. – They inject a considerable amount of money into the economy. – They take risks that larger companies sometimes avoid. – They provide specialized goods and services. Characteristics of Small Businesses – Most small firms have a narrow focus. – Small businesses have to get by with limited resources. – Small businesses often have more freedom to innovate. – Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace. Factors Contributing to the Increase in the Number of Small Businesses – E-commerce – Social media – Technological advances – Growing diversity in entrepreneurship – Corporate downsizing and outsourcing Entrepreneurial spirit – The positive, forward-thinking desire to create profitable, sustainable business enterprises Why People Start Their Own Companies – More control over their futures – Tired of working for someone else – Passion for new product ideas – Pursue business goals that are important to them on a personal level – Inability to find attractive employment anywhere else Business plan – A document that summarizes a proposed business venture, goals, and plans for achieving those goals  Blueprint for an Effective Business Plan – Summary – Mission and objectives – Company overview – Products and services – Management and key personnel – Target market – Marketing strategy – Design and development plans – Operations plan – Start-up schedule – Major risk factors – Financial projections – Exit strategy Advisory board – A team of people with subject-area expertise or vital contacts who help a business owner review plans and decisions Business incubators – Facilities that house small businesses and provide support services during the company’s early growth phases Seed money – The first infusion of capital used to get a business started Micro lenders – Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans Venture capitalists (VCs) – Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit  Angel investors – Private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest or banks are willing to lend Initial public offering (IPO) – A corporation’s first offering of shares to the public Crowd funding – Soliciting project funds, business investment, or business loans from members of the public