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Businesses
organizations that provide goods or services that are then sold to earn profits.
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Profits
the difference between a business’s revenues and its expenses. Rewards owners get for risking their money and time.
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External environment
everything outside an organization’s boundaries that may affect it.
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Political-Legal Environment
reflects the relationship between business and government, usually in the form of government regulation of business. It is important for several reasons.
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Economic System
a nation’s system for allocating its resources among its citizens, both individuals and organizations.
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Capital (obtaining and using labor and other
resources requires capital)
the financial resources/funds needed to operate a business enterprise.
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Planned Economy
economy that relies on a centralized government to control all or most factors of production and allocation decisions.
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Market Economy
rely on capitalism and free enterprise to create an environment in which producers and consumers are free to sell and buy what they choose within certain limits. As a result, items produced and prices paid are largely determined by supply and demand. The underlying premise of a market economy is to create shared value - in theory, at least, effective businesses benefit because they earn profits on what they sell while customers also benefit by getting what they want for the best price available.
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Demand
is the willingness and ability of buyers to purchase a product (a good or a service).
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Supply
the willingness and ability of producers to offer a good or service for sale.
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Equilibrium Price
profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal.
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Oligopoly
market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products.
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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.
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Productivity
a measure of economic growth that compares how much a system produces with the resources needed to produce it.
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Balance of Trade
is the economic value of all the products that it exports minus the economic value of its imported products.
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Stability
condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate.
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Inflation
occurs when an economic system experiences widespread price increases.
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Recession
A period, during which aggregate output, as measured by GDP, declines.
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Depression
a prolonged and deep recession.
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Fiscal policy
policy used by a government regarding how it collects and spends revenue.
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Monetary policy
policy used by a government to control the size of its money supply.
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Ethics
beliefs about what is right and wrong or good and bad in actions that affect others.
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Utility
ability of a product to satisfy a human want or need.
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Social Responsibility
the attempt of a business to balance its commitments to groups and individuals in it environment, including customers, other businesses, employees, investors, and local communities.
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Organizational Stakeholders
those groups, individuals, and organizations that are directly affected by the practices of an organization and who therefore have a stake in its performance.
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Suppliers
they are producers who offers a good or service for sale.
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Consumerism
form of social activism dedicated to protecting the rights of consumers in their dealings with businesses.
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Collusion
illegal agreement between two or more companies to commit a wrongful act.
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Whistle-blower
employee who detects and tries to put an end to a company’s unethical, illegal, or socially irresponsible actions by publicizing them.
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Obstructionist Stance
approach to social responsibility that involves doing as little as possible and may involve attempts to deny or cover up violations.
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Defensive Stance
approach to social responsibility by which a company meets only minimum legal requirements in the commitments to groups and individuals in its social environment.
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Accommodative Stance
approach to social responsibility by which a company, if specifically asked to do so, exceeds legal minimums in its commitments to groups and individuals in its social environment.
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Proactive Stance
approach to social responsibility by which a company actively seeks opportunities to contribute to the well-being of groups and individuals in its social environment.
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Small business
independently owned business that has relatively little influence in its market.
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Services
products having nonphysical features, such as information, expertise, or an activity that can be purchased.
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Business plan
document in which the entrepreneur summarizes her or his business strategy for the proposed new venture and how that strategy will be implemented.
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Franchising
an arrangement in which a buyer purchases the right to sell the good or service of the seller.
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Venture capital
private funds from wealthy individuals seeking investment opportunities in new growth companies.
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Sole Proprietorship
business owned and usually operated by one person who is responsible for all of its debts.
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Partnership
owned by more than one person.
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Cooperatives
form of ownership in which a group of sole proprietorships and/or partnerships agree to work together for common benefits.
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Corporation
business that is legally considered an entity separate from its owners and is liable for its own debts; owner’s liability extends to the limits of their investments.
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Limited Liability Corporation (LLC)
hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability.
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Strategic Alliance
strategy in which two or more organizations collaborate on a project for mutual gain.
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Joint Venture
strategic alliance in which the collaboration involves joint ownership of the new venture.
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Divestiture
strategy whereby a firm sells one or more of its business units.
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Imports
products made or grown abroad but sold domestically.
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Exports
products made or grown domestically but shipped and sold abroad.
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North American Free Trade Agreement (NAFTA)
agreement to gradually eliminate tariffs and other trade barriers among the United States, Canada, and Mexico.
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European Union (EU)
agreement among major European nations to eliminate or make uniform most trade barriers affecting group members.
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Association of Southeast Asian Nations (ASEAN)
organization for economic, political, social, and cultural cooperation among Southeast Asian nations.
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World Trade Organization (WTO)
organization through which member nations negotiate trading agreements and resolve disputes about trade policies and practices.
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Balance of trade
economic value of all products a country exports minus the economic value of all products it imports.
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Trade deficit
situation in which a country’s imports exceed its exports, creating a negative balance of trade.
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Trade surplus
situation in which a country’s exports exceed its imports, creating a positive balance of trade.
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Balance of payments
flow of all money into or out of a country.
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Exchange rate
rate at which the currency of one nation can be exchanged for the currency of another nation.
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Absolute Advantage
the ability to produce something more efficiently than any other country can.
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Comparative Advantage
the ability to produce some products more efficiently than others.
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National Competitive Advantage
international competitive advantage stemming from a combination of factor conditions, demand conditions, related and supporting industries, and firm strategies, structures, and rivalries.
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Outsourcing
the practice of paying suppliers and distributors to perform certain business processes or to provide needed materials or services.
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Royalties
ongoing payments that the exporter receives that are calculated as a percentage of the license holder’s sales.
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Quota
restriction on the number of products of a certain type that can be imported into a country.
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Embargo
government order banning exportation and/or importation of a particular product or all products from a particular country.
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Tariff
tax levied on imported products.
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