Ch2 Flashcards
What are the major elements of the external environment?
economic conditions, technology, political-legal considerations, social issues, global environment, issues of ehtical and social responsibility, the business environment, and emerging challenges/opportunities
aggregate output
total quantity of goods and services produced by an economic system over a given period
standard of living
total quality and quantity of goods and services that a country’s citizens can purchase with the currency used in their economic system
business cycle
pattern of short-term ups and downs (expansions and contractions) in an economy
What are the four phases of a business cycle?
peak, recession, trough, and recovery
recession
usually two consecutive quarters when the economy shrinks
depression
when the trough extends two or more years
gross domestic product (GDP)
total value of all goods and services produced within a given period by a national economy through domestic factors of production
gross national product (GNP)
total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located
Genuine Progress Indicator (GPI)
a more realistic measure that treats activities that harm the environment or our quality of life as costs and gives them negative values
GDP per capita
GDP per person
real GDP
GDP calculated to account for changes in currency vlalues and price changes
nominal GDP
GDP measured in current dollars or with all components valued at current prices
purchasing power parity
principle that exchange rate are set so similar products in different countries are about the same
productivity
measure of economic growth that compares how much a system produces with the resources needed to produce it
balance of trade
total of a country’s exports minus its imports
national debt
total amount of money that a country owes its creditors
budget deficits
result of government spending more in one year than it takes during that year
stability
condition in an economic system in which the amount of money available and the quantity of goods and services produced are growing at about the same rate
Most countries have inflation rates between ___ and ___ percent
2, 15
consumer price index (CPI)
measure of the prices of typical products purchased by consumers living in urban areas
deflation
a period of generally falling prices
What are the main types of unemployment?
frictional (temporary while looking for a new job)
seasonal (their jobs are seasonal)
cyclical (downturn in the business cycle)
structural (they lack skills)
fiscal policies
policies whereby governments collect and spend revenues
monetary policies
policies where the government controls the size of the nation’s money supply
cycle of unemployment
low unemployment = shortage of labour, businesses raise wages, produce less because reduced profit margins –> raise product prices = consumers buying less (businesses reduce work force and cycle starts again)
Bank of Canada
essential for the government to influence the willingness of banks to lend money (crucial to Canada’s monetary policy)
tight monetary policy
when Bank of Canada restricts the money supply and banks charge higher interest rates, which results in reducing spending by companies and consumers
easy monetary policy
when Bank of Canada loosens money supply to increase spending
technology
all the ways firms create value for their constituents
includes human knowledge, work methods, physical equipment, electronics, processing systems, etc
research and development (R&D)
activities that are necessary to provide new products, services, and processes
basic (or pure) R&D
improving knowledge in an area without a primary focus on whether any discoveries that might occur are immediately marketable
applied R&D
focusing specifically on how a technological innovation can be used in the making of a product or service that can be sold in the marketplace
technology transfer
the process of getting a new technology out of the lab and into the marketplace
politlcal-legal environment
conditions affecting the relationship btwn business and government (usually regulations)
socio-cultural environment
conditions including the customs, values, attitudes, and demographic characteristics of the society in which an organization functions
What trends are evident now that businesses need to differentiate themselves more aggressively?
higher-quality products, planned obsolescence, and product life cycles
What are the three most important issues facing Canadian businesses?
the value of the Canadian dollar, skilled labour shortage, and the environment
What are the four components of industry rivalry, according to Michael Porter?
threat of new entrants, bargaining power of consumers, bargaining power of suppliers, and threat of substitutes
core competencies
skills and resources with which an organization competes best and creates the most value for owners
outsourcing
strategy or paying suppliers and distributors to perform certain business processes or to provide needed materials o services
viral marketing
strategy of using the internet and word-of-mouth to spread product information
process
any activity that adds value to some input, transforming it into an output for a customer (can be external or internal)
business process management
approach by which firms move away from department-oriented organization and toward process-oriented team structures that cut across departmental boundaries
acquisition
the purchase of a company by another, which absorbs the smaller company into its operations
merger
the union of two companies to form a single new business (more collaborative than acquisition)
horizontal merger
a merger of two firms that have previously been competitors in the same industry
vertical merger
a merger of two firms that have previously had a buyer-seller relationship
conglomerate merger
a merger of two firms in unrelated businesses
friendly takeover
acquisition in which management of the acquired company welcomes the firm’s buyout by another company
hostile takeover
acquisition in which management of the acquired company fights the firm’s buyout by another company
poison pill
a defence that management adopts to make a firm less attractive to an actual or potential hostile suitorin a takeover attempt
divestiture
occurs when a company sells part of its existing business operations to another company
spinoff
strategy of setting up one or more corporate units as new, independent corporations
employee stock ownership plans
an arrangement where a corporation buys its own stock with loaned funds and holds it in trust for its employees. Employees earn the stock based on some condition, such as seniority. Employees control the stock’s voting rights immediately, even though they may not physically own the stock until conditions are met
strategic alliance
an enterprise in which two or more persons or companies temporarily join forces to undertake a particular project
subsidiary corporation
one that is owned by another corporation
parent corporation
a corporation that owns a subsidiary corporation
