Econ, Org., Ops., IT Flashcards
Chapters 3, 7, 10, 14
Microeconomics
Studies human choices and resource allocation.
Demand
Demand refers to the willingness and ability of buyers to purchase goods and services at different prices. Demand is driven by a number of factors that influence how people decide to spend their money, including price and consumer preferences, and household income. It may also be driven by outside circumstances or larger economic events.
Supply
supply is the amount of goods and services for sale at different prices.
Demand Curve
demand curve is a graph of the amount of a product that buyers will purchase at different prices. Demand curves typically slope downward, meaning that buyers will purchase greater quantities of a good or service as its price falls.
Supply Curve
A supply curve shows the relationship between different prices and the quantities that sellers will supply or offer for sale, regardless of demand. As price increases, other things constant, a producer becomes more willing and able to supply the good. Movement along the supply curve is the opposite of movement along the demand curve.
Equilibrium price
The point where the two curves meet identifies the equilibrium price, the prevailing market price at which you can buy an item or the price toward which a good or service will trend. If the actual market price differs from the equilibrium price, buyers and sellers tend to make economic choices that restore the equilibrium level. Disequilibrium results in either a surplus or shortage.
Macroeconomics
Macroeconomics is the study of a country’s overall economic issues. Macroeconomic topics usually relate topics to be discussed—output, unemployment, and inflation. Macroeconomics refers to the performance, structure, behavior, and decision making of an economy as a whole. Each nation’s policies and choices help determine its economic system.
4 Types of Competition in Private Enterprise System
pure competition,
monopolistic competition,
oligopoly,
monopoly.
Pure competition
A market structure in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price. Instead, prices are set by the market as the forces of supply and demand interact. Firms can easily enter or leave a purely competitive market because no single company dominates. Buyers see little difference between the goods and services offered by competitors.
Monopolistic competition
A market structure, like that for retailing, in which large numbers of buyers and sellers exchange differentiated (heterogeneous) products, so each participant has some control over price.
Oligopoly
A market structure in which relatively few sellers compete and high start-up costs form barriers to keep out new competitors. Competing products in an oligopoly usually sell for very similar prices because substantial price competition would reduce profits for all firms in the industry.
Monopoly
A single supplier in a market - occurs when a firm possesses unique characteristics so important to competition in its industry that they form barriers to prevent entry by would-be competitors.
Regulated monopolies
Local, state, or federal government grants exclusive rights in a certain market to a single firm. Pricing decisions—particularly rate-increase requests—are subject to control by regulatory authorities such as state public service commissions.
planned economy
government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual firms. Two forms of planned economies are communism and socialism.
Socialism
Characterized by government ownership and operation of major industries such as communications. Allows private ownership in industries considered less crucial to social welfare, such as retail shops, restaurants, and certain types of manufacturing facilities.
Communism
In which all property would be shared equally by the people of a community under the direction of a strong central government. Central government owns the means of production, and the people work for state-owned enterprises; determines what people can buy because it dictates what is produced in the nation’s factories and farms.
mixed market economies
economic systems that draw from both types of economies, to different degrees. The proportions of private and public enterprise can vary widely in mixed economies, and the mix frequently changes.
Privatization
Conversion of government-owned and operated companies into privately held businesses. Governments may privatize state-owned enterprises in an effort to raise funds and improve their economies. The objective is to cut costs and run the operation more efficiently.
Business Cycle Stages
prosperity, recession, depression, and recovery.
A business cycle is a cycle of fluctuation in the long-term natural growth rate of Gross Domestic Product (GDP).
Recession (Business Cycle)
a cyclical economic contraction that lasts for six months or longer—consumers frequently postpone major purchases and shift buying patterns toward basic, functional products carrying low prices. Businesses mirror these changes in the marketplace by slowing production, postponing expansion plans, reducing inventories, and often cutting the size of their workforce.
Recovery (Business Cycle)
In the recovery stage of the business cycle, the economy emerges from recession and consumer spending picks up steam. The economy experiences high levels of growth in gross domestic product, employment, output levels, and corporate profits.
Depression (Business Cycle)
If an economic slowdown continues in a downward spiral over an extended period of time, the economy falls into depression.
Prosperity (Business Cycle)
unemployment remains low, consumer confidence about the future leads to more purchases, and businesses expand—by hiring more employees, investing in new technology, and making similar purchases—to take advantage of new opportunities.
Productivity
the relationship between the goods and services produced in a nation each year and the inputs needed to produce them. In general, as productivity rises, so does an economy’s growth and the wealth of its citizens. In a recession, productivity stalls or even declines. Describes the relationship between the number of units produced and the number of human and other production inputs necessary to produce them.
Productivity (ratio)
Total productivity considers all inputs necessary to produce a specific amount of outputs. Stated in equation form, it can be written as follows:
Total Productivity = Output (goods or services produced) / Input (human/natural resources, capital)
Gross Domestic Product (GDP)
the sum of all goods and services produced within its boundaries. The GDP is based on the per-capita output of a country—in other words, total national output divided by the number of citizens.
Inflation
rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, component parts, human resources, and other factors of production. Excess consumer demand generates what is known as demand-pull inflation whereas increases in the costs of factors of production generate cost-push inflation. Devalues money as persistent price increases reduce the amount of goods and services people can purchase with a given amount of money.
Core Inflation
the inflation rate of an economy after energy and food prices are removed.
Deflation
occurs when prices continue to fall - when the inflation rate falls below 0%, also called a negative inflation rate.
Consumer Price Index (CPI)
measures the monthly average change in prices of goods and services.
Producer Price Index (PPI)
the average change over time of prices of goods and services received by domestic producers.
Unemployment Rate
Usually expressed as a percentage of the total workforce actively seeking work but currently unemployed. The total labor force includes all people who are willing and available to work at the going market wage, whether they currently have jobs or are seeking work.
Frictional unemployment
experienced by members of the workforce who are temporarily not working but are looking for jobs. (New graduates, those who left jobs and looking, former workers returning to labor force.)
Seasonal unemployment
joblessness of people in a seasonal industry. Construction workers, farm laborers, fishing boat operators, and landscape employees may contend with bouts of seasonal unemployment when conditions make work unavailable.
Cyclical unemployment
people who are out of work because of a cyclical contraction in the economy.
Structural unemployment
applies to people who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones. This situation may arise because these workers lack the necessary skills for available jobs or because the skills they have are no longer in demand.
Monetary Policy
government actions to increase or decrease the money supply and change banking requirements and interest rates to influence spending by altering bankers’ willingness to make loans.
Expansionary Monetary Policy
increases the money supply in an effort to cut the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth.
Restrictive (Contractionary) Monetary Policy
reduces the money supply to curb rising prices, over expansion, and concerns about overly rapid economic growth. This is accomplished by increasing interest rates.
Fiscal Policy
government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth.
Budget Deficit
When the government spends more than the amount of money it raises through taxes. To cover the deficit, the U.S. government borrows money by selling Treasury bills, Treasury notes, and Treasury bonds to investors. All of this borrowing makes up the national debt.
Budget Surplus
excess funding that occurs when government spends less than the amount of funds raised through taxes and fees.
Global Economic Challenges
(1) asset bubbles in a major economy, (2) deflation in a major economy, (3) failure of a major financial mechanism or institution, (4) failure/shortfall of critical infrastructure, (5) fiscal crises in key economies, (6) high structural unemployment or underemployment, (7) Illicit trade, (8) Trade tensions, (9) Energy price shock, (10) Unmanageable Inflation.
Management
the process of achieving organizational objectives through people and other resources. The manager’s job is to combine human and technical resources in the best way possible to achieve the company’s goals.
3 Levels of Management
top. middle, and supervisory (first-line)
Top Management
Top managers devote most of their time to developing long-range plans for their organizations. Make decisions such as whether to introduce new products, purchase other companies, or enter new geographical markets. Set a direction for their organization and inspire the company’s executives and employees to achieve their vision for the company’s future.
Middle Management
Middle managers’ attention focuses on specific operations, products, or customer groups within an organization. Responsible for developing detailed plans and procedures to implement the company’s strategic plans.
Supervisory Management
includes positions such as supervisor, section chief, and team leader. Directly responsible for assigning non-managerial employees to specific jobs and evaluating their performance. Work directly with the employees who produce and sell the company’s goods and services. Responsible for implementing middle managers’ plans by motivating workers to accomplish daily, weekly, and monthly goals.
3 Basic Types of Skills for Managers
technical, human, and conceptual
Technical skills (for Managers)
Manager’s ability to understand and use the techniques, knowledge, tools, and equipment of a specific discipline or department. Especially important for first-line managers and become less important at higher levels of the management hierarchy.
Human skills (for Managers)
Include the ability to communicate, build rapport, collaborate, motivate, and lead employees to meet organizational goals through individual and team assignments. Might also include emotional intelligence, the ability to understand and manage one’s own emotions, along with the emotions of others.
Conceptual skills (for Managers)
determine a manager’s ability to see the organization as a unified whole and to understand how each part of the overall organization interacts with other parts. These skills involve an ability to understand abstract relationships, interpret information, develop ideas, and creatively solve problems.
Managerial functions
1) planning, 2) organizing, 3) directing, and 4) controlling
Planning
process of anticipating future events and conditions and determining courses of actions for achieving organizational objectives. Helps a business focus its vision, avoid costly mistakes, and seize opportunities. Should be flexible and responsive to changes in the business environment, and should involve managers from all levels of the organization.
Organizing
process of blending human and material resources through a formal structure of tasks and authority; arranging work, dividing tasks among employees, and coordinating them to ensure implementation of plans and accomplishment of objectives. Involves classifying and dividing work into manageable units with a logical structure.
Directing
guiding and motivating employees to accomplish organizational objectives. Directing might include training (or retraining), setting up schedules, delegating certain tasks, and monitoring progress.
Controlling
evaluates an organization’s performance against its objectives. Assesses the success of the planning function and provides feedback for future rounds of planning.
The four basic steps in controlling are to establish performance standards, monitor actual performance, compare actual performance with established standards, and make corrections if necessary.
Types of Planning
strategic, tactical, operational, and contingency, with each step including more specific information than the last.
Strategic Planning
the process of determining the primary objectives of an organization and then acting and allocating resources to achieve those objectives. Generally, strategic planning is undertaken by top executives in a company.
Tactical Planning
involves implementing the activities specified by strategic plans. Tactical plans guide the current and near-term activities required to implement interconnected retail strategies.
Operational Planning
creates the detailed standards that guide implementation of tactical plans. This activity involves choosing specific work targets and assigning employees and teams to carry out plans. Unlike strategic planning, which focuses on the organization as a whole, operational planning deals with developing and implementing tactics in specific functional areas.
Contingency Planning
plans that allow a firm to resume operations as quickly and as smoothly as possible after a crisis while openly communicating with the public about what happened. Usually designates a chain of command for crisis management, assigning specific functions to particular managers and employees in an emergency.
Strategic Planning Process
1) defining a mission, 2) assessing the organization’s competitive position, 3) setting organizational objectives, 4) creating strategies for competitive differentiation, 5) implementing the strategy, and 6) evaluating the results and refining the plan.
Mission Statement
a written explanation of an organization’s business intentions and aims. Guides the actions of employees and publicizes the company’s reasons for existence.
Assessing Competitive Position
A frequently used tool in this phase of strategic planning is the SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities, and threats. By systematically evaluating all four of these factors, a company can then develop the best strategies for gaining a competitive advantage.
Objectives
set guideposts by which managers define the organization’s desired performance in such areas as new-product development, sales, customer service, growth, environmental and social responsibility, and employee satisfaction. While the mission statement identifies a company’s overall goals, objectives are more concrete.
Strategy for Competitive Differentiation
the unique combination of a company’s abilities and resources that set it apart from its competitors.
Monitoring/Adapting Strategic Plans
Monitoring involves securing feedback about performance. Managers might compare actual sales against forecasts; compile information from surveys; listen to customer feedback; interview employees who are involved; and review reports prepared by production, finance, marketing, or other company units. Ongoing use of such tools as SWOT analysis and forecasting can help managers adapt their objectives and functional plans as changes occur.
Decision Making
the process of recognizing a problem or opportunity, evaluating alternative solutions, selecting and implementing an alternative, and assessing the results. Managers make two basic kinds of decisions: programmed decisions and non-programmed decisions.
Programmed Decision
involves simple, common, and frequently occurring problems for which solutions have already been determined. Ex. reordering office supplies, renewing a lease, and referring to an established discount for bulk orders. Made in advance—the company sets rules, policies, and procedures for managers and employees to follow on a routine basis.
Non-programmed Decision
involves a complex and unique problem or opportunity with important consequences for the organization. Ex. entering a new market, deleting a product from the line, or developing a new product.
Steps in the Decision-Making Process
1) recognizes a problem or opportunity, 2) develops possible courses of action, 3) evaluates the alternatives, 4) selects and implements one of them, and 5) assesses the outcome.
Leadership styles
autocratic, democratic, free-rein
Corporate Culture
system of principles, beliefs, and values. The leadership style of its managers, the way it communicates, and the overall work environment influence a company’s corporate culture. Typically shaped by the leaders who founded and developed the company and by those who have succeeded them. Managers use symbols, rituals, ceremonies, and stories to reinforce corporate culture.
Organization
a structured group of people working together to achieve common goals. An organization features three key elements: human interaction, goal-directed activities, and structure.
Organizing Process
Managers first determine the specific activities needed to implement plans and achieve goals. Next, they group these work activities into a logical structure. Then they assign work to specific employees and give the people the resources they need to complete it. Managers coordinate the work of different groups and employees within the company. Finally, they evaluate the results of the organizing process to ensure effective and efficient progress toward planned goals. Evaluation sometimes results in changes to the way work is organized.
Departmentalization
process of dividing work activities into units within the organization. In this arrangement, employees specialize in certain jobs—such as marketing, finance, or design. Depending on the size of the company, usually a senior-level executive runs the department, followed by middle-level managers and supervisors. The five major forms of departmentalization subdivide work by product, geographical area, customer, function, and process.
Span of Management
or span of control, is the number of employees a manager supervises. These employees are often referred to as direct reports. First-line managers have wider spans of management
Centralization and Decentralization
A company that emphasizes centralization retains decision making at the top of the management hierarchy. A company that emphasizes decentralization locates decision making at lower levels. A trend toward decentralization has pushed decision making down to operating employees in many cases. Companies that have decentralized believe that the change can improve their ability to serve customers.
Organizational Structure
line, line-and-staff, committee, and matrix. While some companies do follow one type of structure, most use a combination.
Line Organizations
establishes a direct flow of authority from the chief executive to employees. The line organization defines a simple, clear chain of command—a hierarchy of managers and workers.
Line-and-Staff Organizations
combines the direct flow of authority of a line organization with staff departments that support the line departments. Line departments participate directly in decisions that affect the core operations of the organization. Staff departments lend specialized technical support.
Committee Organizations
structure that places authority and responsibility jointly in the hands of a group of individuals rather than a single manager. This model typically appears as part of a regular line-and-staff structure.
Matrix Organizations
links employees from different parts of the organization to work together on specific projects. Popular at high-technology and multinational corporations, as well as hospitals and consulting firms.
Utility
the want-satisfying power of a good or service. Businesses can create or enhance four basic kinds of utility: time, place, ownership, and form. A company’s marketing operation generates time, place, and ownership utility by offering products to customers at a time and place that is convenient for purchase. Production creates form utility by converting raw materials and other inputs into finished products.
Mass Production
system for manufacturing products in large quantities through effective combinations of employees with specialized skills, mechanization, and standardization. Mass production makes outputs (goods and services) available in large quantities at lower prices than individually crafted items would cost.
Flexible Production
allows manufacturing equipment to be used for more than one purpose, is usually more cost-effective for producing smaller runs. Generally involves using information technology to share the details of customer orders, technology (sometimes robots) to fulfill the orders, and skilled people to carry out whatever tasks are needed to fill a particular order.
Customer-Driven Production
evaluates customer demands in order to make the connection between products manufactured and products bought
Production processes
Production processes use either an analytic or synthetic system; time requirements call for either a continuous or an intermittent process.
analytic production system
reduces a raw material to its component parts in order to extract one or more marketable products.
synthetic production system
reverse of an analytic system. It combines a number of raw materials or parts or transforms raw materials to produce finished products.
continuous production process
generates finished products over a lengthy period of time.
intermittent production process
generates products in short production runs, shutting down machines frequently or changing their configurations to produce different products.
LEED (Leadership in Energy and Environmental Design)
voluntary certification program administered by the U.S. Green Building Council, aimed at promoting the most sustainable construction processes available.
computer-aided design (CAD)
process that allows engineers to design components as well as entire products on computer screens faster and with fewer mistakes than they could achieve working with traditional drafting systems.
computer-aided manufacturing (CAM)
computer tools to analyze CAD output and enable a manufacturer to analyze the steps that a machine must take to produce a needed product or part.
flexible manufacturing system (FMS)
production facility that can be quickly modified to manufacture different products.
Factors in the Location Decision
The decision of where to locate a production facility hinges on the concept of time-to-market, which includes transportation, human, and physical or infrastructure factors.
Production and operations managers
oversee the work of people and technology to convert inputs (materials and resources) into finished goods and services. These managers perform four major tasks:
1. Plan the overall production process
2. Determine the best layout for the firm’s facilities
3. Implement the production plan
4. Control the manufacturing process to maintain the highest possible quality
Implementing the Production Plan
This activity involves (1) deciding whether to make, buy, or lease components; (2) selecting the best suppliers for materials; and (3) controlling inventory to keep enough, but not too much, on hand.
Inventory Control
Production and operations managers’ responsibility for inventory control requires them to balance the need to keep stock on hand to meet demand against the costs of carrying inventory. Among the expenses involved in storing inventory are warehousing costs, taxes, insurance, and maintenance.
Production Control
creates a well-defined set of procedures for coordinating people, materials, and machinery to provide maximum production efficiency.
Five-step process composed of planning, routing, scheduling, dispatching, and follow-up. These steps are part of a company’s overall emphasis on total quality management.
Production Planning (production control)
determines the amount of resources (including raw materials and other components) an organization needs to produce a certain output. The production planning process develops a bill of materials that lists all needed parts and materials.
Routing (production control)
determines the sequence of work throughout the facility and specifies who will perform each aspect of the work at what location. Routing choices depend on two factors: the nature of the good or service and the facility layouts
Scheduling (production control)
managers develop timetables that specify how long each operation in the production process takes and when workers should perform it. Efficient scheduling ensures that production will meet delivery schedules and make efficient use of resources.
Scheduling Charts (production control)
Gantt chart, tracks projected and actual work progress over time. Best for simple projects.
PERT (program evaluation and review technique) chart, which seeks to minimize delays by coordinating all aspects of the production process. For complex projects.
Dispatching (production control)
management instructs each department on what work to do and the time allowed for its completion. The dispatcher authorizes performance, provides instructions, and lists job priorities.
Follow-up (production control)
managers and employees or team members spot problems in the production process and come up with solutions.
Benchmarking
determining how well other companies perform business functions or tasks. Process of comparing other firms’ standards, performance metrics, and best practices, usually in terms of quality, costs, and time.
Quality Control
measuring output against established quality standards. Companies need such checks to spot defective products and to avoid delivering inferior shipments to customers.
ISO Standards
standards for everything from the format of banking and telephone cards to freight containers to paper sizes to metric screw threads. The U.S. member body of ISO is the American National Standards Institute (ANSI).
