Studied by 54 peopleTags & Description
Gross domestic product (GDP)
The total value of all goods and services produced within a country's borders.
Business
An organization => group of people with common purpose and structure (goals + means)
that provides goods and/or services to satisfy customers' needs and creates value by transforming inputs into outputs. Lower value to higher value
For-profit organizations
Organizations that aim to make a profit and build assets by providing goods and/or services. With asset building motive
Not-for-profit organizations
Organizations that provide goods and services without a profit motive, also known as nonprofit organizations. Can still make profit
Goods-producing businesses
Businesses that create value by producing tangible goods. Capital intensive
Service businesses
Businesses that create value by providing intangible services to customers. service intensive
Revenue
The money a company earns through the sale of goods and services.
Profit
The money left over after deducting all business expenses from revenue. Accounted profit
Business Model
A concise description of how a business generates revenue and creates and exchanges value.
Source of innovations
small to big
Competitive advantage
The aspect of a product or company that makes it more appealing to its target customers. Distinguishes value proposition
Risk/Reward VS Moral Hazard
Management
The process of coordinating and overseeing the activities of a business to achieve its goals.
Social environment
The trends and forces in society that can affect business, such as demographics and purchasing power. Affects demand
Stakeholders
Individuals or groups affected by a company's decisions and activities.
Stakeholders =/ shareholders
Technological environment
The forces resulting from the practical application of science to innovations, products, and processes.
Disruptive technologies: change nature of industry. Create and destroy companies
Economic environment
The conditions and forces that affect the cost and availability of goods, services, and labor.
Legal and regulatory environment
The laws and regulations at various levels that govern business activities.
Market environment
The target customers, influences on their behavior, and competitors with similar products.
Manufacturing, production, and operations
The functional area of a business that defines how it makes or does things.
Marketing
The functional area that identifies market opportunities, develops products, and creates brand and promotion strategies.
Research and development (R&D)
The functional area responsible for conceiving and designing new products.
Information technology (IT)
The systems that promote communication and information usage within a company.
Finance and Accounting
The functional area that manages the funds and financial records of a business.
Human resources (HR)
The functional area that handles employee recruitment, development, and support.
Business services => help company with legal needs, banking, real estate and other
Barrier to entry
Any resource or capability a company must have before it can start competing in a market.
High barrier to entry for capital intensive
gov testing and approval, licensing procedures, limited supplies, skilled employees, tight markets
Professionalism
The quality of performing at a high level and conducting oneself with purpose and pride. SEVEN KEY TRAITS: excel, dependable + accountable, team player, communication, etiquette, ethical decisions, positive outlook.
Etiquette => expected norms of behavior in any situation
Economics
The study of how a society uses its scarce resources to produce and distribute goods and services.
Economy = total sum of economic activity within a given region
macro/micro
factors of production
Scarcity
The condition of any productive resource having a finite supply, which generates competition and trade-offs.
% factors of production:
natural resources
human resources
Capital
entrepreneurship
knowledge
scarcity
opportunity cost: value of most appealing alternative not chosen. Trade-offf
Economic system
The policies that define a society's economic structure and resource allocation.
Planned (communism) — Socialism — Free market (capitalism)
Nationalization — privatization
Demand
The quantity of a product or service that buyers are willing and able to purchase at different prices.
Supply
The quantity of a product or service that sellers are willing and able to sell at different prices.
Equilibrium point
The point at which quantity supplied equals quantity demanded.
Competition
Rivalry among businesses for the same customers.
Pure competition
Peter Thiel
Monopoly
A market situation in which one company dominates and can control prices.
Monopolistic competition: many sellers differentiate their products from those of competitors in at least some small way
oligopoly: very small n of suppliers provide particular good or service
Business cycles
Fluctuations in the rate of economic growth over several years, including periods of recession and expansion.
recession
economic expansion and contraction
Unemployment rate
The portion of the labor force currently without a job.
frictional unemployment: natural
Structural: mismatch
Cyclical: fluctuations
Seasonal: time dependent
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 stabilizing the economy.
Monetary policy
Government actions to regulate the nation's money supply, usually carried out by the central bank.
Fiscal policy
The use of government revenue collection and spending to influence the business cycle.
Type of tax:
real property taxes
sales taxes
excise taxes: selected items
payroll taxes: income
Economic indicators
Statistics that measure the performance of the economy, such as GDP and inflation.
leading: future
lagging: past
price indexes: CPI, changes in price of collection of consumer g&s
PPI: price trends + producer and wholesaler levels
GDP
Money
A generally accepted means of payment for goods and services, serving as a medium of exchange, unit of accounting, store of value, and standard of deferred payment.
4 functions: exchange, accounting, store of value, deferred payment
fiat money: official money of gov. no utility in itself
Money supply
The amount of money in circulation at a given time.
currency should be: divisible, portable, acceptable, scarce, durable, stable in value
Fiat money
Official currencies issued and maintained by government decree.
Cryptocurrency
Digital currency represented by digital tokens, such as Bitcoin and Ethereum.
Central bank
The regulatory authority that oversees banks and implements monetary and fiscal policies.
The Fed
The Federal Reserve, the central bank of the United States.
1. Conducting monetary policy as required by Congress, with three objectives: maximizing employment, keeping prices stable, and keeping inflation under control.
2. Maintaining the stability of the financial system by minimizing systemic risks (financial risks that extend beyond any single bank or other company)
3. Supervising and regulating individual financial institutions. Ensuring a secure and efficient payment system to support financial transactions, including providing an adequate supply of currency and processing checks and electronic payments.
4. Protecting consumers and promoting community development by ensuring fair lending, fair housing, and community reinvestment.
Medium of exchange
Money's function as a facilitator of transactions.
Unit of accounting
Money's function in providing a common measure of value in transactions.
Store
Federal funds rate
The interest rate that member banks charge each other to borrow money overnight from the funds they keep in their Federal Reserve accounts.
Three mechanisms to adjust the federal funds rate
Buying and selling Treasury bonds, bills, and notes; adjusting reserve requirements; lending through the discount window.
Discount rate
The interest rate that member banks pay when they borrow funds from the central bank.
Prime rate
The interest rate a bank charges its best loan customers.
Federal Deposit Insurance Corporation (FDIC)
Protects money in customer accounts and manages the transition of assets when a bank fails.
National Credit Union Administration (NCUA)
Provides regulatory supervision and account protection for credit unions.
Fannie Mae and Freddie Mac
Government-sponsored enterprises that provide liquidity to the mortgage market.
Investment banks
Firms that offer services related to IPOs, M&A, and other investment matters.
- Facilitating mergers, acquisitions, sales, and spin-offs of companies
- Underwriting initial public offerings (when a company sells shares of stock to the public for the first time)
- Managing and advising on investments
- Raising capital (such as by selling bonds) on behalf of corporate or government clients
- Advising on and facilitating complex financial transactions
- Investing in or lending money to companies
- Providing risk management advice
- "Making markets" for clients, which involves acting as an interim buyer or seller to help clients acquire or divest assets.
Commercial banks
Banks that accept deposits, offer checking and savings accounts, and provide loans.
- Retail banks serve consumers with checking and savings accounts, debit and credit cards, and loans for cars, and other major purchases.
- Merchant banks offer financial services to businesses, particularly in the area of international finance. Merchant banking is sometimes more narrowly defined as the management of private equity investments, making it more akin to investment banking.
- Thrift banks, also called thrifts, or savings and loan associations, offer deposit accounts and focus on offering home mortgage (=hypothèque) loans.
- Credit unions are not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses. Note that thrifts and credit unions do not refer to themselves as banks, but the broad definition of banking used here distinguishes them from investment banks.
- Private banking refers to a range of services for wealthy individuals and families, such as managing real estate and other investments, setting up trust funds, and planning philanthropic giving.
Private banking
Services for wealthy individuals and families, such as managing investments and setting up trust funds.
- Retail banks serve consumers with checking and savings accounts, debit and credit cards, and loans for wthmes, cars, and other major purchases.
- Merchant banks offer financial services to businesses, particularly in the area of international finance. Merchant banking is sometimes more narrowly defined as the management of private equity investments, making it more akin to investment banking.
- Thrift banks, also called thrifts, or savings and loan associations, offer deposit accounts and focus on offering home mortgage (=hypothèque) loans.
- Credit unions are not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses. Note that thrifts and credit unions do not refer to themselves as banks, but the broad definition of banking used here distinguishes them from investment banks.
- Private banking refers to a range of services for wealthy individuals and families, such as managing real estate and other investments, setting up trust funds, and planning philanthropic giving.
Fintech
Technological innovations that improve financial services, including AI, cloud computing, and mobile apps.
Netbanks: Banks that provide services entirely through mobile and digital channels.
Economic globalization
The increasing integration and interdependence of national economies.
1. Focusing on relative strengths: specialization and exchange will increase a country’s total output and allow trading partners to enjoy a higher standard of living.
2. Expanding markets: Many companies have ambitions too large for their own backyards.
3. Pursuing economies of scale: By expanding their markets, companies can benefit from economies of scale, which enable them to produce goods and services at lower costs by purchasing, manufacturing, and distributing higher quantities.
4. Acquiring materials, goods, and services: No country can produce everything its citizens want at prices they're willing to pay, so companies and consumers alike reach across borders to find what they need.
5. Keeping up with customers
6. Keeping up with competitors
Balance of trade
The total value of a nation's exports minus the total value of its imports.
Economies of scale: Savings from buying parts and materials, manufacturing, or marketing in large quantities.
Trade surplus: A favorable trade balance created when a country exports more than it imports.
Trade deficit: An unfavorable trade balance created when a country imports more than it exports.
Balance of payments: The sum of all payments one country receives from another country minus the sum of all payments it makes to other countries, over some given period of time.
The balance of payments includes the balance of trade, plus the net dollars received and spent on foreign investment, military expenditures, tourism, foreign aid, and other international transactions.
è Two key measurements of a nation's level of international trade are the balance of trade and the balance of payments.
Foreign exchange rate
The rate at which one currency is traded for another.
Exchange rate: The rate at which the money of one country is traded for the money of another.
A currency can be strong or weak.
Floating exchange rate system: a currency's value or price fluctuates in response to the forces of global supply and demand. The supply and demand of a country's currency are determined in part by what is happening in the country's own economy.
Free trade
International trade unencumbered by restrictive measures.
It has positive and negative connotations (competition, health, safety...). It produces winners and losers, but the winners gain more than the losers lose, so the net effect is positive.
Protectionism
Government policies aimed at shielding a country's industries from foreign competition.
When a government believes that free trade is not in the best interests, it can intervene in several ways:
- !!! Tariffs: Taxes levied on imports
- Import quotas: Limits placed on the quantity of imports a nation will allow for a specific product.
- Embargo: A total ban on trade with a particular nation (a sanction) or of a particular product.
- Restrictive import standards: requiring special licenses for doing certain kinds of business and then making it difficult or expensive for foreign companies to obtain such licenses.
- Export subsidies: Financial assistance in which producers receive enough money from the government to allow them to lower their prices in order to compete more effectively in the global market.
- Antidumping measures: !!! dumping: Charging less than the actual cost or less than the home-country price for goods sold in other countries.
- Sanctions: embargoes (total or partial) that revoke a country's normal trade relations status (often as alternative to war).
World Trade Organization (WTO)
Permanent forum for negotiating, implementing, and monitoring international trade.
Trading blocs: Organizations of nations that remove barriers to trade among their members and that establish uniform barriers to trade with non-members nations. (Exp. NAFTA, EU, ASEAN, UNASUR, GAFTA)
European union: 27 countries that have eliminated hundreds of local regulations, variations in product standards, and protectionist measures that once limited trade among member countries. Many members implemented the EURO.
Asia-Pacific Economic Cooperation (APEC): 21 countries working to liberalize trade in the Pacific Rim, 40% world population, long-term goal of encouraging trade and investment among member countries and helping the region achieve sustainable economic growth.
USMCA Agreement (Former NAFTA): U.S., Canada and Mexico: free flow of goods/services/capital
AfCFTA: certain African countries.
Multinational corporations (MNCs)
Companies with operations in more than one country.
Importing: Purchasing goods or services from another country and bringing them into one's own country.
Exporting: Selling and shipping goods or services to another country.
International Licensing: Agreement to produce and market another company's product in exchange for a royalty or fee.
International Franchising: Selling the right to use a business system, including brand names, business processes, trade secrets, and other assets.
International Strategic Alliances and JVs: long-term partnerships between two or more companies to jointly develop, produce, or sell products.
!!! Foreign direct investment (FDI): Investment of money by foreign companies in domestic business enterprises.
Culture
A shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior.
Ethnocentrism: Judging all other groups according to the standards, behaviors, and customs of one's own group.
Stereotyping: Assigning a wide range of generalized and often false attributes to an individual based on his or her membership in a particular culture or social group.
Cultural pluralism: The practice of accepting multiple cultures on their own terms.
Tax haven: A country whose favorable banking laws and low tax rates give companies the opportunity to shield some of their income from higher tax rates in their home countries or other countries where they do business.
Multidomestic strategy
A decentralized approach to international expansion with independent operating units in each new country.
Global strategy
A centralized approach to international expansion with headquarters making major decisions.
Transnational strategy
A hybrid approach that combines international scale with local market responsiveness.
Products: Which fits the destination market? Should we Customize them?
Customer Support: How to deal with technical assistance, installation or post sales?
Promotion Campaign: Standardization or customization?
Pricing: Should we adapt to every market? Standard?
Staffing: Expats? Locals? A mix of both?
Classical approach
Emphasizes rationality and efficiency in management, including scientific management and general administrative theory.
Early management: In 1776, Adam Smith published The Wealth of Nations, in which he argued the economic advantages that organizations and society would gain from the division of labor (or job specialization)—that is, breaking down jobs into narrow and repetitive tasks.
Industrial revolution: A period during the late eighteenth century when machine power was substituted for human power, making it more economical to manufacture goods in factories than at home.
4 management theory: classical, behavioral, quantitative, and contemporary.
Each of the four approaches contributes to our overall understanding of management, but each also a limited view of what it is and how to best practice it.
Scientific management
Using the scientific method to find the most efficient way to perform a job.
Therbligs: A classification scheme for labeling basic hand motions.
General administrative theory
Focuses on describing what managers do and what constitutes good management practice. Resources are used efficiently and effectively.
Principles of management: Fundamental rules of management that could be applied in all organizational situations and taught in schools.
Henri Fayol’s described the five functions that managers perform (planning, organizing, commanding, coordinating, and controlling) and 14 principles of Management.
Bureaucracy: A form of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. => WEBER
WEBER: division of labour, authority/hierarchy, impersonality, formal rules and regulations, career orientation
Organizational behavior (OB)
The study of the actions of people at work.
People were the most important asset of the organization and should be managed accordingly.
Hawthorne Studies
Studies that provided insights into individual and group behavior.
Elton Mayo: people’s behavior is largely impacted by group factors and standards.
Quantitative approach
The use of quantitative techniques to improve decision making in management.
Total quality management (TQM)
A philosophy of management driven by continuous improvement and customer responsiveness.
System
A set of interrelated and interdependent parts arranged to produce a unified whole.
Closed system
A system that is not influenced by or does not interact with its environment.
Open system
A system that interacts with its environment.
Contingency approach (situational approach)
A management approach that recognizes organizations as different and requiring different ways of managing based on the situations they face.
Sole proprietorship
A business owned by a single person where the person and the business are the same entity.
Advantages of Sole Proprietorships
- Simplicity – easy and cheap process of creation
- Single layer of taxation – Easy process
- Privacy–no need to report on the business.
- Flexibility and control - You own the place!
- Fewer limitations on personal income–All the business makes (after tax) is yours!
- Personal satisfaction – You are your boss!
Disadvantages of Sole Proprietorships
- Financial liability
- Very demanding on the owner
- Limited managerial perspective
- Resource limitations
- No employee benefits for the owner
- Finite life span
Unlimited liability
A legal condition where any damages or debts incurred by a business are the owner's personal responsibility.
Partnership
An unincorporated company owned by two or more people.
Advantages of Partnerships:
- Simplicity
- Single layer of taxation
- More resources than with sole proprietorship
- Cost sharing
- Broader skill and experience base
- Longevity
Disadvantages of Partnerships
- Unlimited liability
- Potential for conflict
- Expansion, succession, and termination issues
General partnership
A partnership where all partners have joint authority to make decisions and joint liability for the firm's financial obligations.
Limited partnership
A partnership where one or more persons act as general partners with unlimited liability, and the remaining owners are limited partners with limited liability.
Limited liability
A legal condition where the maximum amount each owner is liable for is equal to their investment in the business.
Partnership Agreement: Document that reflects investment percentages, profit- sharing percentages, management responsibilities and other expectations of each owner, decision-making strategies, succession and exit strategies, criteria for admitting new partners, and dispute-resolution procedures.
!!! Master limited partnership (MLP): A partnership that is allowed to raise money by selling units of ownership to the general public.
Limited liability partnership (LLP): A partnership in which each partner has unlimited liability only for his or her own actions and at least some degree of limited liability for the partnership as a whole.
Corporation
A legal entity that has the power to own property and conduct business, distinct from any individual person.
Shareholders
Investors who purchase shares of stock in a corporation.
A shareholder is a Stakeholder, but a Stakeholder is not necessarily a Shareholder.
Stakeholder
A party that has an interest in a company and can either affect or be affected by the business.
Private corporation
A corporation where all the stock is owned by a few individuals or companies and is not available for purchase by the public.
Public corporation
A corporation where stock is sold to anyone who has the means to buy it.
Advantages of Corporations:
- Ability to raise capital.
- Liquidity: A measure of how easily and quickly an asset such as corporate stock can be converted into cash by selling it
- Longevity
- Limited liability
Disadvantages of Corporations:
- Cost and complexity
- Reporting requirements
- Managerial demands
- Possible loss of control
- Double taxation
- Short-term orientation of the stock market
S corporation
A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership.
Benefit corporation: A profit-seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit.
Limited liability company (LLC)
A structure that combines limited liability with the pass-through taxation benefits of a partnership, with no restrictions on the number of shareholders or their participation in management.
Corporate governance
Policies, procedures, relationships, and systems in place to oversee the successful and legal operation of a company.
Proxy
A document that authorizes another person to vote on behalf of a shareholder in a corporation.
Shareholder activism
Activities undertaken by shareholders to influence executive decision making in areas ranging from strategic planning to social responsibility.
Board of Directors
A group of professionals elected by shareholders with responsibility for the overall direction of the company and the selection of top executives.
Note
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