ITB Final Flashcards
needs
things that are required in order to live
wants
things that add comfort and pleasure to life
goods
things you can see and touch; products purchased to meet your wants and needs
services
activities provided for the satisfaction of wants and needs, consumed at the same time they are produced
economic resources
things used to produce goods and services
scarcity
not having enough resources to satisfy every need
economic decision making
the process of choosing which needs and wants will be satisfied
trade-off
what you make when you have to give something up
opportunity cost
the value of the next best alternative you weren’t able to choose
economic system
the method a country uses to answer the 3 economic questions
command economy
an economy in which resources are owned and controlled by the government
market economy
in which the resources are owned and controlled by the people of the country
traditional economy
an economy in which goods and services are produced the way they have always been produced
mixed economy
an economy that combines the elements of command and market economies
capitalism
the private ownership of economic resources by individuals rather than by the government
consumer
a person who buys and uses goods and services
producer
an individual or organization that determines what products and services will be available for sale
demand
the quantity of a good or service that consumers are willing and able to buy
supply
the quantity of a good or service that businesses are willing and able to provide
market price
the point where supply and demand are equal
what is the basic economic problem?
scarcity
6 steps in the decision making process
- define the problem
- identify the choices
- evaluate each choice
- choose the best alternative
- act on choice
- review decision
3 economic questions
- What goods and services will be produced?
- How will the goods and services be produced?
- What needs and wants will be satisfied with the goods and services produced?
Principles of the US economic system
private property, freedom of choice, profit & competition
Natural resources
Raw materials supplied by nature
Human resources
people who produce goods and services
capital resources
the products and money used in the production of goods and services
private property
you can own, use, or sell things of value
freedom of choice
you can make economic decisions independently and must accept the consequences of those choices
GDP
the total value of all finals goods and services produced in a country during one year
personal income
salaries and wages as well as investment income and government payments to individuals
retail sales
the sales of durable and nondurable goods bought by consumers
business cycle
the movement of the economy from one condition back to another again and back again. the 4 phases are prosperity, recession, depression, and recovery
prosperity
the peak of the business cycle, people who want to work are working, businesses produce in record numbers, good wages, GDP increases
recession
demand begins to decrease, business lowers production, unemployment rises, GDP slows for 2 or more quarters of year
depression
phase is marked by prolonged period of high unemployment, weak consumer sales, and business failures
recovery
phase in business cycle which unemployment decreases, demand increases, and gdp rises
inflation
general increase in prices
price index
a number that compares cost of living prices in one year w prices in an earlier base year
deflation
a decrease in general level of prices
capital projects
spending by businesses for items such as: land, buildings, equipment, and new product development
stock
ownership in a corporation
bond
debt for organization, bondholders lend money to a company & are paid interest for use of their money
budget surplus
a financial situation that occurs when a government spends less than it takes in
budget deficit
a financial situation that occurs when a government spends more than it takes in
national debt
total amount owed by federal government
specialization of labor
training of workers to do a specific task
division of labor
workers are assigned specific elements of a manufacturing process
demand-pull inflation
when the demand for goods and services is greater than the supply
cost-push inflation
when production costs increase -> causing prices of products + services to increase
measure of inflation
CPI (consumer price index)
Why are inflation rates deceptive?
The CPI is based on a group of selected goods and services
Major influence on interest rates
supply and demand for money
equity
ownership
creditor
a person who purchases a corporate or government bond
imports
goods and services bought from other countries
exports
goods and services sold to other countries
balance of trade
the difference between a country’s total exports and imports
balance of payment
difference between the amount of money that goes out of a country and the amount that comes into a country
exchange rate
that value of a currency in one country compared with the value in another
infrastructure
a factor that supports international trade in industrialized countries: transportation, utility systems, & communication
trade barriers
restriction to free trade
quota
a government set limit on the quantity of a product that may be imported or exported within a given period
tariff
a tax that the government places on certain imported products
embargo
an action imposed by the government to stop the export or import of a product completely
multinational company (MNC)
an organization that does business in several countries
joint venture
an agreement between 2 or more companies to share a business project
money 3 values
- A store of value for future buying
- A medium of exchange for business transactions
- A unit of measure to value goods and services
domestic business
the making, buying, and selling of goods and services within a country.
international business / foreign trade
business activities needed for creating, shipping, and selling goods and services across national borders.
absolute advantage
When a country can produce a good or service at a lower cost than other countries
comparative advantage
a situation in which a country specializes in the production of a good or service at which it is relatively more efficient.
foreign debt
the amount a country owes to other countries.
trade surplus
If a country exports (sells) more than it imports (buys)
trade deficit
If a country imports more than it exports, unfavorable position
3 main factors affecting currency exchange rates
the country’s balance of payments, economic conditions, and political stability.
free - trade zone
a selected area where products can be imported duty-free and then stored, assembled, and/or used in manufacturing.
free-trade agreement
member countries agree to remove duties (also called import taxes) and trade barriers on products traded among them.
common market
member countries no longer encounter duties and other trade barriers. Companies are free to invest in each member’s country. Workers are allowed to move freely across borders.
4 main factors of international business environment
geography, cultural influences, economic development, and political and legal restrictions.
WTO (World trade organization)
settles trade disputes and enforces free-trade agreements between its members.
IMF (International Money Fund)
helps to promote economic cooperation. It maintains an orderly system of world trade and exchange rates
licensing
selling the right to use some intangible property (production process, trademark, or brand name) for a fee or royalty. (manufacturing process)
franchise
the right to use a company name or business process in a specific way. (product or service)
global strategy
uses the same product and marketing strategy worldwide.
multinational strategy
treats each country’s market differently. Firms develop products and marketing strategies that adapt to the customs, tastes, and buying habits of a distinct national market.
social responsibility
the duty of a business to contribute to the well-being of a community.
ethics
principles of morality or rules of conduct.
business ethics
rules about how businesses and their employees should behave.
code of ethics
a set of rules for guiding the action of employees or members of an organization.
contract
an agreement to exchange goods or services for something of value, usually money.
patent
the exclusive right of an inventor to make, sell, and use a product or process for 20 years.
copyright
the protection of the creative work of authors, composers, and artists.
trademark
a word, letter, or symbol linked with a specific company or product.
public utility
an organization that supplies a service or product vital to all people.
antitrust laws
laws that prevent monopolies and promote competition and fairness.
social concerns
This includes protection of the environment, inclusion of minorities and women in the workplace, employment of physically challenged and older workers, and a healthy and safe work environment.
conservation
saving scarce natural resources
conditions of work
Clauses relating to employee well-being that include the healthy and safety of those working
conflict of interest
can occur when an action by a company or individual results in an unfair benefit
Guide Lines of Ethics of Business Situations
Is the action legal? Does the action violate professional or company standards? Who is affected by the action and how?
Interstate commerce
any business conducted that involves companies in more than one state.
Intrastate commerce
refers to business dealings involving companies that do business in only one state.
4 elements needed in a contract
agreement, competent parties, consideration, and legality
contingent worker
one who has no explicit or implicit contract for long-term employment.
intermediaries
businesses involved in selling the goods and services of producers to consumers and other businesses.
partnership agreement
a written agreement among all owners detailing the rules and procedures that guide ownership and operations.
articles of incorporation
a written legal document that defines ownership and operating procedures and conditions for a business.
mission statement
a short, specific written statement of the reason a business exists and what it wants to achieve.
goal
a precise statement of results the business expects to achieve.
policies
guidelines used in making consistent decisions.
procedures
a list of steps to be followed for performing a particular work activity; a description of the way work is to be done.
organization chart
a diagram that shows the structure of an organization, classifications of work and jobs, and the relationships among those classifications.
6 basic activities of businesses
generating ideas, raising capital, employing and training staff, buying goods and services, marketing goods and services, and maintaining business records
extractors
Businesses that take resources from nature for direct consumption or for use in developing other products
manufacturers
get supplies from other producers and convert them into products.
c - corporation
taxed as a separate entity and owners and employees pay tax on their income.
s - corporation
the owners pay taxes as individual income.
corporate bylaws
operating procedures for the corporation
board of directors
the people who will make the major policy and financial decisions for the business.
Limited Liability Partnership
A limited liability partnership (LLP) identifies some investors who cannot lose more than the amount of their investment. Not allowed to participate in day-to-day management and difficult and costly to establish.
Joint venture
unique business organized by two or more other businesses to operate for a limited time and for a specific project
Limited Liability Corporation
combines the best features of a partnership and a corporation, simple, provides liability protection for owners
cooperative
owned by members, serves their needs, and is managed in their interest.
Several principles guide the effective organization of work
responsibility, authority, accountability, unity of command, and span of control
responsibility
the obligation to complete specific work.
authority
the right to make decisions about how responsibilities should be accomplished.
accountability
taking responsibility for the results achieved.
unity of command
there is a clear reporting relationship for all staff of a business.
span of control
the number of employees who are assigned to a particular work task and manager.
functional organizational structure
Work is arranged within business functions such as production, operations, marketing, and human resources.
Matrix organizational structure
work is structured around specific projects, products, or customer groups.
entrepreneurship
the process of starting, organizing, managing, and assuming the responsibility for a business.
venture capital
money provided by large investors to finance new products and new businesses that have a good chance to be profitable.
innovation
an invention or creation that is brand new.
improvement
a design change that increases the usefulness of a product, service, or process.
small business
a business that is organized for profit, is independently owned and operated, and is not dominant in its field.
business plan
a written description of a business idea and how it will be carried out, including all major business activities.
start - up financing
the amount of money needed to open the business.
short-term financing
the money needed to pay for the current operating activities of a business.
long-term financing
money needed for the main resources of a business (such as land, buildings, and equipment) that will last for many years.
How do new businesses obtain funding
personal savings and credit, banks, family and friends, online lenders, angel investors, venture capital, and crowdfunding.
angel investors
individuals who have enough wealth that they can provide funding to business startups, often for a stake in the ownership.
crowd sourcing
an online request for funding where people may give to startups they want to support.
advantage of small businesses over large
Meeting customer needs and providing unique services
reasons for small business failures
- Not keeping adequate records - - Not having enough start-up money
- Lack of management experience
- Lack of experience with the type of business
- Not controlling operating expenses
- Poor location for the business - - Failure to manage credit offered to customers
steps to creating a business
an idea plus experience, right place and time, team approach, and preparation and research
key features of a business plan
a general description of the company, the credentials of the owner(s), a description of the product or service, an analysis of the market (demand, customers, and competition), and a financial plan.
management
the process of strategically accomplishing the goals of an organization through the effective use of people and other resources.
planning
the function of a manager that involves analyzing information, setting goals, and making decisions about what needs to be done.
organizing
the function of a manager involving identifying and arranging the work and resources needed to achieve the goals that have been set.
staffing
the function of a manager that includes all of the activities involved in obtaining, preparing, and compensating the employees of a business.
implementing
a manager’s effort to direct and lead people to accomplish the planned work of the organization.
controlling
the managerial function that determines to what extent the business is accomplishing the goals it set out to reach in the planning stage.
management style
the way a manager works with and involves employees.
leadership
the ability to motivate individuals and groups to accomplish important goals.
human relations
the way people get along with each other.
formal influence
power based on a leader’s position within the formal structure of an organization.
informal influence
power resulting from the personal characteristics of a leader rather than the formal structure of an organization.
core values
the important principles that guide decisions and actions in a company.
jobs of managers
make decisions, solve problems, respond to competition, and develop new strategies.
3 levels of managers
supervisors, middle managers, and executives.
supervisors
- first level of management in a business. They are responsible for the day-to-day work of a small group of employees.
- spend most of their time implementing the plans of executives and middle managers.
strategic management style
a style in which managers are more collaborative and involve employees in decision making. A manager using a strategic style expects employees to work well without direct supervision and will seek their input on important decisions.
soft skills
relate to how managers work and how they relate to others
middle managers
- specialists with responsibilities for specific parts of a company’s operations.
- work with the company’s business plan once it has been approved by executives.
- develop strategic plans
- time is devoted to the organizing, staffing, and implementing functions.
executives
- top-level managers with responsibilities for the direction and success of the entire business
- spend most of their time on planning and controlling activities.
employees
plan and organize their work. They might take part in hiring and training new employees.
tactical management style
style in which the manager is more directive and controlling. The manager will make the major decisions and stay in close contact with employees while they work to make sure the work is done well.
downsizing
a planned reduction in the number of employees to cut costs and make a business more efficient.
outsourcing
removing work from one company and sending it to another company that can complete it at a lower cost.
job analysis
a specific study of a job to identify in detail the job duties and skill requirements.
job description
a document that is published when a position is available. It provides details about a company and job, the responsibilities of the position, and the qualifications and skills that are required.
compensation
the total value of the cash payments and non-cash extras an employee receives in exchange for work.
incentive systems
compensation systems connected to the quality or quantity of an employee’s performance.
promotion
any form of communication used to inform, persuade, or remind; employee to a position with greater responsibility.
transfer
the assignment of an employee to another job in the company with a similar level of responsibility.
termination
the end of an employment relationship between a company and an employee.
organizational culture
a shared belief system reflected in a company’s work environment, behaviors, and relationships.
workplace diversity
the comprehensive inclusion of people with differences in personal characteristics and attributes.
glass ceiling
an artificial limit placed on minority groups moving into positions of authority and decision making.
7 major human resources goals
Identify needs of company, supply workers to fill needs, match abilities with specific jobs, provide training to workers, develope payments plans to workers, protect health and well being of workers, and maintain good work enviroment
4 activities of managing human resources
planning and staffing, performance management, compensation and benefits, and employee relations.
planning and staffing
Planning and staffing activities are directed at identifying and filling all the company’s jobs with qualified people
performance management
evaluating the work of employees and improving performance through training and development.
compensation and benefits
planning and managing payroll, personnel records, and benefits programs.
employee relations
maintaining a safe, healthy, and productive work environment for all employees.
time wage
time wage pays the employee a specific amount of money for each hour worked.
straight salary
pays a specific amount of money for each week or month worked.
commission
percentage of sales for which the employee was responsible.
piece rate
employee receives a specific amount for each unit of work produced.
base plus incentive
This system combines a wage or salary with an additional amount based on the employee’s performance
cafeteria plan
allocates a certain amount of money to each employee that can be spent on benefits. The employee selects their preferred benefits.
discharge
ends employment due to inappropriate behavior or unsatisfactory work
layoff
a temporary or permanent reduction in the number of employees due to changing business conditions.
personal time
a few hours each month that can be scheduled for nonjob activities.
family leave policies
allow employees to take a leave from work for the birth or adoption of a child, to care for a sick family member, or for other personal emergencies.
flextime
allows employees some choice in how their workdays and work hours are arranged
job sharing
splits the responsibilities of one job among two people, where each person works a part-time schedule.
flex place
means that many employees can complete all or part of their work away from the traditional business site.
organizational benefits of diversity
broad employment pool, broader base of knowledge and understanding, more positive image of company from consumers, better at serving diverse markets, and global strats will improve
individual benefits of workplace diversity
employees have an opportunity to develop to their full ability and individuals will feel respected and support despite their differences
societal benefits of workplace diversity
prejudice and discrimination will be reduced as a societal problem and the country will have a more talented, experienced, economically successful workforce
