Midterm #1

Midterm #1

1. Business: any activity that provides good and services to consumers for the purpose of making a profit.

   • External forces on Business
     • Economy
       • Systems: Planned: communism, socialism, capitalism: free market
       • World Economic Goals
         • Growth- GDP
           • HIgh Employment
             • Price stability- CPI
     • Government
       • Monetary Policy
         • federal reserve
       • Fiscal Policy
         • taxing and spending
     • consumer trends
     • the pressure to be a good corporate citizen
       • Social Responsibility and Ethics: take care of ALL stakeholders
         • Employee attitudes: uneasy about the work they do, object to how they are treated, question correctness of management's directives
         • Rationalizations: my behavior isn't really illegal; action is in everyone's best interests; everyone does it
         • Organizational Behavior: shared values, top management held accountable, leaders should be role models, code of conduct

2. Goods are tangible; services are intangible and cannot be returned

3. Competition

   • Perfect Competition: many sellers, standardized product, many consumers
   • monopolistic competition: many sellers, differentiated product, many consumers
   • Oligopoly: few sellers, similar product, many consumers
   • Monopoly: very few sellers to all customers

4. Foreign Affairs

   • Countries trade to be most effecient, it allows for countries to specialize in what they have the comparative advantage in as oposed to everything they need
     • Balance of Trade: value of imports - value of exports
       • Surplus: sells more than buys
         • Deficit: buys more than sells
     • Blance of Payments: amount of money coming in- amount of money going out; over time period
   • In-Franchise Agreement: company/franchiser grants foreign company the rights to use its brand name and sell its products
   • Outsourcing aka Contract Manufacturing: US company contracts with a local company in a foreign country to manufacture one of its products
     • US company retains control of product design and development and puts its own label on it
   • Foreign Direct Investment: the formal establishment of business operations (ex. factory or office) on foreign soil)
   • Multinational Corporation:
     • Pros: better, cheaper products, creates jobs, raises the standard of living in developing countries, increases cross-cultural understanding
     • Cons: destroys jobs and lowers wages in home country workers, traditional lifestyle/values weakened or destroyed, irreversible damage to the environment

5. Forms of Business Ownership

   • Consider: control? Profits? liability? financial needs? set up? continuance?
   • Regular taxable corporations
     • Regular C-corporation- double taxation
   • flow through entities
     • sole proprietorship Partnership S-Corp LLC

6. Entrepreneur: someone who identifies a business oportunity and assumes the risl of creating and running a business to take advantage of it

   • WHY? be your own boss; achieve financial independence, creative freedom, use own skills and knowlege