Slides 2 Flashcards
What is the primary goal of a business?
To earn a profit
Nonprofit organizations do not share this goal.
Define a product in the context of business.
A product can be a tangible good, service, or idea
Examples include automobiles, dry cleaning, and legal advice.
What are the two main types of stakeholders?
Market and Nonmarket
Market stakeholders engage in economic transactions, while nonmarket stakeholders do not.
What is the Shareholder Theory of the firm?
Sees the firm as property of owners; prioritizes owners’ interests over others
The purpose is to maximize long-term market value for shareholders.
What is the Stakeholder Theory of the firm?
Corporations serve a broad public purpose to create value for society
Profit is necessary for survival but not the only purpose.
What are the four types of competitive environments?
- Pure competition
- Monopolistic competition
- Oligopoly
- Monopoly
True or False: Economic expansion is characterized by rising unemployment.
False
Economic expansion generally leads to lower unemployment.
What is the Free-Enterprise System?
An economic system where many large economies operate freely, allowing companies to succeed or fail based on market demand
Examples include the U.S., Canada, and Japan.
Fill in the blank: The __________ is a measure of the economy’s total output.
Gross domestic product (GDP)
What are the three arguments in support of the Stakeholder Theory?
- Ethical responsibility to stakeholders
- Long-term sustainability
- Enhanced reputation and trust
Differentiate between internal and external stakeholders.
Internal stakeholders are part of the organization; external stakeholders are outside the organization
Examples of internal stakeholders include employees, while external stakeholders include the community and government.
What is stakeholder analysis?
The identification of relevant stakeholders and analysis of their interests and power.
What is the purpose of stakeholder mapping?
To visually represent the relationships and influences of stakeholders on the firm.
What resources are considered in economics?
- Natural resources
- Human resources (labor)
- Financial resources (capital)
- Intangible resources
What is the economic system that encourages free competition and individual ownership?
Capitalism
Also known as free enterprise.
Describe the role of supply and demand in a free-enterprise system.
Supply and demand determine prices and availability of goods and services.
What are the characteristics of communism in terms of business ownership?
Most businesses are owned and operated by the government.
What are the characteristics of socialism in terms of competition?
The government controls competition in basic industries; encouraged in small businesses.
What is the significance of the equilibrium price?
It represents the price at which the quantity of goods supplied equals the quantity demanded.
What happens during an economic contraction?
Economic activities decline, leading to reduced output and increased unemployment.
What defines a nonprofit organization?
An organization that does not aim to earn profits but may provide goods or services.
True or False: Shareholders are the only type of stakeholders in a business.
False
Shareholders are just one type of stakeholder.
What is the relationship between business and society according to General Systems Theory?
Businesses exist in relation to their broader social environment and constantly interact with it.
What is stakeholder analysis?
The identification of relevant stakeholders and an analysis of their interests and power.
Who are the relevant stakeholders?
Market and nonmarket stakeholders.
What are the interests of each stakeholder?
Concerns and expectations from their relationship with the firm.
What is the power of each stakeholder?
The ability of a group to use resources to make an event happen or secure a desired outcome.
What are the five types of stakeholder power?
- Voting power
- Economic power
- Political power
- Legal power
- Informational power
What is voting power?
The legal right to cast a shareholder vote.
What is economic power?
The ability to grant or withhold transactions with the focal company.
What is political power?
Actions taken through legislation, regulations, or lawsuits.
What is legal power?
Lawsuits filed against the focal company for harm caused by the firm.
What is informational power?
Having access to valuable data, facts, or details.
How are stakeholder coalitions likely to form?
Through common interests, forming temporary alliances.
What is a stakeholder map?
A visual representation of the relationships among stakeholder interests, power, and coalitions.
What does stakeholder salience mean?
Stakeholders who stand out as important or draw attention.
What factors make stakeholders salient?
- Power
- Legitimacy
- Urgency
What are boundary-spanning departments?
Departments that reach across the dividing line between the company and society.
What is the purpose of a firm beyond making a profit?
To create value for all its stakeholders.
What six dynamic forces shape the business and society relationship?
- Changing societal expectations
- Growing emphasis on ethical reasoning and actions
- Globalization
- Evolving government regulations and business response
- Dynamic natural environment
- Explosion of new technology and innovation
What is the primary focus of stakeholder analysis?
Understanding the basis of stakeholder interests and power.
Fill in the blank: Stakeholder power is the ability of a group to use resources to make an event happen or to secure a _______.
[desired outcome]
True or False: All groups are relevant to every situation in stakeholder analysis.
False
