Dsst Introduction To Business

Front 1

Sole Proprietorship

Back 1

Type of business in which an individual owns all of the assets, profits and liabilities associated with the venture.

Front 2

Halo Effect

Back 2

Rating someone similarly based on a few attributes.

Front 3

Stagflation

Back 3

An economy in which there is no growth plus inflation.

Front 4

Maslow's Heirarchy of Need Theory

Back 4

Believes few people reach the top level and those that doe are called "trancenders."

Front 5

Task Identity

Back 5

The job characteristic that identify's the degree which an employee performs a job from beginning to ending.

Front 6

Repatriation

Back 6

The returning of an employee from foreign assignment.

Front 7

Overheating

Back 7

A too rapid increased in gross national product (GNP).

Front 8

Penny Stocks

Back 8

High risk stocks.

Front 9

Market Introduction

Back 9

When a product's life-cycle starts.

Front 10

Self-Actualization

Back 10

The top of the pyramid in Maslow's Hierarchy of Needs Theory.

Front 11

Operating budget

Back 11

A budget to operate and get fore-casted revenues.

Front 12

Capital Spending

Back 12

Spending for assets whose return should extend beyond a year.

Front 13

Moral-Rights

Back 13

The ethical belief that a person's right of consent, privacy conscience, due process and life must be considered.

Front 14

Third-country National

Back 14

An employee who does not belong to the host, or home, country.

Front 15

Escalating Commitment

Back 15

The continuing investment in a poor decision.

Front 16

Satisficing

Back 16

A "good-enough" approach.

Front 17

Entrepreneur

Back 17

A top level manager assigned to find and acquire more business.

Front 18

Leader

Back 18

Visionary and decision-maker that empowers employees.

Front 19

Consumer Rights

Back 19

The right to be heard, to choose and to safety.

Front 20

Contractionary

Back 20

A fiscal policy that creates a government with lower spending than taxes.

Front 21

Structural Unemployment

Back 21

Job loss due to outdated positions.

Front 22

The Taft-Hartley Act

Back 22

Bans coercing workers to join a union and employment based on union membership.

Front 23

The Clayton Act

Back 23

Prevents monopolies.

Front 24

The Robinson-Patman Act

Back 24

Prohibits anti-competitive practices (i.e. price discrimination).

Front 25

The Wagner Act

Back 25

Protects unions by banning interference with collective bargaining.

Front 26

The International Monetary Fund

Back 26

Ensures the stability of the international exchange rate system.

Front 27

Buyer Opinion

Back 27

Does not determine supply.

Front 28

Business

Back 28

All profit-seeking activities and enterprises that provide goods and services necessary to an economic system.

Front 29

Profits

Back 29

Rewards for business people who undertake the risks involved to offer goods and services to customers.

Front 30

Not-for-Profit Organizations

Back 30

Organizations that have primary objectives such as public service rather than returning a profit to its owners.

Front 31

Factors of Production

Back 31

4 basic inputs for effective operation: natural resources, capital, human resources and entrepreneurship.

Front 32

Natural Resources

Back 32

All production inputs that are useful in their natural states, including agricultural land, building sites, forests and mineral deposits.

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Capital

Back 33

Production inputs consisting of technology, tools, information and physical facilities.

Front 34

Human Resources

Back 34

Production inputs consisting of anyone who works, including both the physical labor and the intellectual inputs contributed by workers.

Front 35

Entrepreneurship

Back 35

The willingness to take risks to create and operate a business.

Front 36

Private Enterprise System

Back 36

Economic system that rewards firms for their ability to identify and serve the needs and demands of customers.

Front 37

Capitalism

Back 37

Economic system that rewards firms for their ability to perceive and serve the needs and demands of consumers; also called the Private Enterprise System.

Front 38

Competition

Back 38

Battle among businesses for consumer acceptance.

Front 39

Competitive Differentiation

Back 39

Unique combination of organizational abilities, products and approaches that sets a company apart from competitors in the mind of customers.

Front 40

The Right to Private Property

Back 40

The most basic freedom under the private enterprise system; the right to own, use, buy, sell and bequeath lands, building, machinery, equipment, patents, individual possessions and various intangible kinds of property.

Front 41

Entrepreneur

Back 41

A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.

Front 42

Business

Back 42

An organization or economic system where goods and services are exchanged for one another or money.

Front 43

Profits

Back 43

The surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. The best known measure of success in an enterprise.

Front 44

Not-for Profit

Back 44

An incorporated organization which exists for educational or charitable reasons ad from which its shareholders or trustees do not benefit financially, also called a non-profit organization.

Front 45

Factors of Production

Back 45

Resources required for generation of goods and services, generally classified in four major groups: (1) land, or natural resources, (2) Labor, or human resources, (3) Capital, includes all man-made resources and (4) Enterprise, bring all the other factors together for production.

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Natural Resources

Back 46

Assets or material that constitutes the natural capital of a nation.

Front 47

Capital

Back 47

Wealth in the form of money or assets, taken as a sign of financial strength of an individual, organization or nation, and assumed to be available for development or investment.

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Capital

Back 48

Money invested in a Business to generate income.

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Human Resources

Back 49

The division of a company that is focused on activities relating to employees; normally include recruiting and hiring of new employees, orientation and training of current employees, employee benefits and retention. (Formally called Personnel).

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Private Enterprise

Back 50

The basis of a free market capitalist system; it is a business unit established, owned and operated by private individuals for profit, instead of by or for any government or its agencies.

Front 51

Capitalism

Back 51

Economic system based (to varying degrees) on private ownership of the factors of production employed in generation of profits. It is the oldest and most common of all economic systems and, in general, is synonymous with free market systems.

Front 52

Consumer Orientation

Back 52

A service offered by companies that focuses on the internal and external needs of a business' customers. It establishes and monitors standards of customer satisfaction and strives to meet the clientele's needs and expectations related to the product or service sold by the business.

Front 53

Branding

Back 53

The process involved in creating a unique name and image for a product in the consumer's mind, mainly through advertising campaigns with a consistent theme.

Front 54

Brand

Back 54

Unique design, sign, symbol, words or combination of these employed in creating an image that identifies a product and differentiates it from its competitors.

Front 55

Trademark

Back 55

The legal name for a brand.

Front 56

Brand Name

Back 56

The legal name for a brand with it identifies or represents a firm (corporate identity).

Front 57

Transaction Management

Back 57

Building and promoting products in the hope that enough customers will buy them to cover costs and earn profits.

Front 58

Relationship Era

Back 58

The business era in which firms seek ways to actively nurture customers loyalty by carefully managing every interaction.

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Relationship Management

Back 59

A collection of activities that build and maintain ongoing, mutually beneficial ties with customers and other parties.

Front 60

Technology

Back 60

The purposeful application of information in the design, production and utilization of goods and services, and in the organization of human activities.

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Tangible Technology

Back 61

Blueprints, models, operating manuals, prototypes, etc.

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Intangible Technology

Back 62

Consultancy, problem-solving and training methods.

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High Technology

Back 63

Entirely, or almost entirely, automated and intelligent technology that manipulates ever finer matter and ever more powerful forces.

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Intermediate Technology

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Semi-automated, partially intelligent technology that manipulates refined matter and medium-level forces.

Front 65

Low Technology

Back 65

Labor intensive technology that manipulates only coarse, or gross, matter and weaker forces.

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Strategic Alliance

Back 66

Agreement for cooperation among 2 or more independent firms to work together toward a common objective(s). Firms do not form a new entity to further their aim, but collaborate while remaining apart and distinct.

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Diversity (accounting)

Back 67

Situation where different batch sizes, distribution channels, product mixes, etc., place different demands on resources due to uneven assignment costs.

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Diversity (HR)

Back 68

Feature of a mixed workforce that provides a wide range of abilities, experience, knowledge and strengths due to its heterogeneity in age, background, ethnicity, physical abilities, political and religious beliefs, sex and other attributes.

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Outsourcing

Back 69

The contracting, or sub-contracting, of non-core activities to free up cash, personnel, time and facilities for activities in which a company holds competitive advantage. Examples include data processing, legal, manufacturing, marketing, payroll, accounting, etc. Also known as contracting out.

Front 70

Offshoring

Back 70

The moving of various operations of a company to another country for reasons such as lower labor costs or more favorable economic conditions.

Front 71

Nearshoring

Back 71

Outsourcing production or services to locations near a firm's home base.

Front 72

Vision

Back 72

The ability to perceive marketplace needs and what an organization must do to satisfy them.

Front 73

Critical Thinking

Back 73

Objective examination of assumption (adopted rules of thumb) underlying current beliefs to assess their correctness and legitimacy, and thus to validate or invalidate the beliefs.

Front 74

Creativity

Back 74

Mental characteristic that allows a person to think outside the box, which results in innovative or different approaches to a particular task.

Front 75

Integrity

Back 75

Adhering to deeply felt ethical principles in business situations.

Front 76

Whistle-blower

Back 76

An employee who publicly reports illegal activities going on inside his/her company.

Front 77

Code of Conduct

Back 77

Formal statement that defines how and organization expects its employees to resolve ethical issues.

Front 78

Stakeholders

Back 78

Any party that is affected by or has an interest in a firm (i.e. customers, investors, employees and the public).

Front 79

Social Responsibility

Back 79

The idea that businesses should not function amorally, but instead should contribute to the welfare of their communities.

Front 80

Social Audits

Back 80

A measurement of how businesses and companies that use a social accounting system report income and expenses on a financial statement.

Front 81

Recycling

Back 81

(1) Reprocessing of used materials for reuse. (2) To sue money in a different way (such as investing profits from industry in developing environmental resources).

Front 82

Green Marketing

Back 82

A marketing strategy that promotes environmentally safe products and production methods.

Front 83

Sustainable

Back 83

The capacity to endure in ecology.

Front 84

Corporate Philanthropy

Back 84

Effort of an organization to make a contribution to the communities in which it earns a profit.

Front 85

Consumerism

Back 85

Public demand that a business consider the wants and needs of its customers in making decisions.

Front 86

Product Liability

Back 86

The responsibility of manufacturers for injuries and damages caused by their products.

Front 87

Fair Trade Movement

Back 87

International trade in which producers are paid a fair price.

Front 88

Fair Trade

Back 88

A market-based approach to pay higher prices to producers on exports from developing countries to developed countries in order for the developing countries to obtain better trading conditions and promote sustainability.

Front 89

The Family and Medical Leave Act of 1993

Back 89

Businesses with 50 or more employees must provide unpaid leave up to 12 weeks annually for any employee who wants time off for the birth or adoption of a child, to become a foster parent or to care for a seriously ill relative, spouse or themselves (if he/she has a serious health condition or injury).

Front 90

Discrimination

Back 90

Applying special treatment, typically unfavorable, t an individual due to the individual's race, religion or sex.

Front 91

Equal Employment Opportunity Commission (EEOC)

Back 91

A commission created to increase job opportunities for women and minorities, and to help end discrimination based on race, religion, color, disability, gender or national origin in any personnel action.

Front 92

Sexual Harrassment

Back 92

Unwelcome and inappropriate actions of a sexual nature in the workplace.

Front 93

Sexism

Back 93

Discrimination against members of either sex, but primarily affecting women.

Front 94

The Pre-conventional Stage

Back 94

The stage of ethical development in which an individual considers their own needs/desires in decision-making and obeys rules out of a desire to avoid punishment or receive rewards.

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The Conventional Stage

Back 95

The stage of ethical development in which an individual is aware of and acts in response to their duty to others, including family and coworker obligations, while still being influenced by self-interest.

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The Post-conventional Stage

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The stage of ethical development in which an individual moves beyond self-interest and duty and is able to take the needs of society into account when making decisions of an ethical nature.

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Economics

Back 97

The entire network of producers, distributors and consumers of goods and services in a local, regional or national community.

Front 98

Microeconomics

Back 98

The study of the economic behavior of individual units of an economy, such as a person, household, firm or industry, and not the aggregate economy.

Front 99

Primary Concern of Microeconomics

Back 99

The factors that affect individual economic choices, the effect of changes in these factors on the individual decision-makers, how their choices are coordinated by markets and how price and demand are determined in individual markets.

Front 100

The main subjects covered under Microeconomics

Back 100

Theory of demand, theory of the firm and the demand for labor and other factors of production.

Front 101

Macroeconomics

Back 101

The study of the behavior of the whole, aggregate, economies or economic system.

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Primary Concern of Macroeconomics

Back 102

The forecasting of national income through the analysis of major economic factors that show predictable patterns and trends, and of their influence on one another.

Front 103

Factors of Macroeconomics

Back 103

The level of employment/unemployment, gross national product (GNP), balance of payments position and prices (deflation/inflation).

Front 104

The main subjects covered under Macroeconomics

Back 104

The role of fiscal and monetary policies, economic growth and determination of consumption and investment levels.

Front 105

Demand (Commerce)

Back 105

A claim for a sum of money as due, necessary or required.

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Demand (Economics)

Back 106

(1) The desire for certain good or services supported by the capacity to purchase it. (2) The aggregate quantity of a product or service estimated to be bought at a particular price. (3) The total amount of funds which individuals or organizations want to commit for spending on goods or services over a specific period.

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Demand (Law)

Back 107

An assertion of a legal right, such as to seek a compensation or relief.

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Supply

Back 108

The total amount of a product (goods or services) available for purchase at any specified price.

Front 109

What determines Supply?

Back 109

(1) Price. (2) Cost of Inputs. (3) Price of competing goods.

Front 110

Equilibrium Price

Back 110

The price at which supply equals demand.

Front 111

Demand Curve

Back 111

Graph curve that normally slopes downward toward the right of the chart (except for a Griffen good where it slopes to the left), showing quantity of a product demanded at different price levels. Customarily price is plotted on the "Y" axis and quantity on the "X" axis and it is assume that (in the short run) income levels, price of substitutions and customer preferences remain unchanged.

Front 112

Supply Curve

Back 112

Graph curve that normally slopes upward to the right of the chart (except in case of regressive supply curve), showing quantity of a product supplied at different price levels. Customarily, price is plotted on the "Y" axis and quantity on the "X" axis, and it is assumed (in the short run) that the price of the inputs and productivity of the production process remain unchanged.

Front 113

Equilibrium Price

Back 113

Open market price at which the quantity of a product supplied matches the quantity demanded.

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Pure Competition

Back 114

An alternative name for Perfect Competition.

Front 115

Perfect Competition

Back 115

The theoretical free-market situation in which the following conditions are met: (1) buyers and sellers are too numerous and too small to have any degree of individual control over price, (2) all buyers and sellers seek to maximize their profit (income), (3) buyers and sellers can freely enter or leave the market, (4) all buyers and sellers have access to information regarding availability, price and quality of goods being traded and (5) all goods of a particular nature are homogeneous, hence substitutable for one another. Also known as perfect market or pure competition.

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Monopolistic Competition

Back 116

A market situation midway between the extremes of perfect competition and an monopoly, and displaying features of both. Firms are free to enter a highly competitive market where several competitors offer products that are close (but not perfect) substitutes and therefore, prices are at the level of average costs. Some consumers have a preference for one product over another that is strong enough to make them keep buying it even when its price increases, thus giving its producer a small amount of market power.

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Oligopoly

Back 117

A market situation in between, and much more common than, perfect competition and a monopoly. Independent suppliers (few in number and not necessarily acting in collusion) can effectively control the supply and thus the price, thereby creating a seller's market. Products are largely similar, differentiated mainly by heavy advertising and promotional expenditure, and can anticipate the effect of one another's marketing strategies (i.e. airline, automotive, banking and petroleum markets).

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Monopoly

Back 118

The market situation where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted. The firms keep prices high, restrict outputs and show little or no responsiveness to the needs of their customers.

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How to most governments try to control monopolies?

Back 119

(1) Imposing price controls. (2) Taking over ownership, or nationalization. (3) Breaking up the companies into two or more competing firms.

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Why would a government facilitate the creation of a monopoly?

Back 120

(1) Reasons of national security.(2) To realize economies of scale for competing internationally or where two or more producers would be wasteful or pointless (i.e. utilities).

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Why do monopolies exist in varying degrees?

Back 121

Due to copyrights, patents, access to materials, exclusive technologies or unfair trade practices.

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Regulated Monopolies

Back 122

Local, state or federal government grants exclusive rights in a certain market to a single firm.

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Planned Economy

Back 123

A type of economy that gives the government total control over the allocation of resources. It alleviates the use of private enterprises and allows the government to determine everything from distribution to pricing.

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Effect of a planned economy.

Back 124

The government is given a dictatorship type control over the resources of the country. They can provide stability, but also can limit growth and advancement of the country if the government does not allocate resources to the innovative enterprises.

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Socialism

Back 125

An economic system in which goods and services are provided through a central system of cooperation and/or government ownership, rather than through competition and a free market system.

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Communism

Back 126

An economic and social system in which all, or nearly all, property and resources are collectively owned by a classless society and not by individual citizens.

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Mixed Market Economy

Back 127

An economic system that draws from both types of economies (private enterprise systems and planned economies) to different degrees.

Front 128

Privatization

Back 128

Sale or return of publicly owned enterprises to private ownership and control (the opposite of nationalization).

Front 129

Recession

Back 129

A period of general economic decline, defined usually as a contraction in the GDP for 6 months (2 consecutive quarters) or more. Considered a normal part of a capitalist economy, but their is no consensus by economists as to the cause.

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Characteristics of a Recession

Back 130

Marked by high unemployment, stagnant wages and a fall in retail sales. It generally does not last longer than one year and is much milder than a depression.

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Productivity

Back 131

A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs. A critical determinant of cost efficiency.

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Productivity Calculation

Back 132

Average output per period divided by the total costs incurred, or resources (capital, energy, materials, personnel) consumed in the same period.

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Gross Domestic Product (GDP)

Back 133

The value of a country's overall output of goods and services (typically during one fiscal year) at market prices, excluding net income from abroad.

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Method for Estimating GDP

Back 134

(1) Expenditure basis - how much money was spent. (2) Output basis - how many goods and services were sold. (3) Income basis - how much income, or profit, was earned. Ideally, all three should yield the same results. The estimates are published quarterly and are constantly revised to approach greater accuracy.

Front 135

GDP at Factor Cost (National Dividend)

Back 135

GDP estimate with indirect taxes deducted from the market prices and subsidies added.

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Net Domestic Product

Back 136

GDP minus depreciation of the national capital stock deducted.

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Gross National Product (GNP)

Back 137

GDP plus income from abroad.

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Main Criticisms of GDP as a realistic guide to a nation's well-being:

Back 138

(1) It is preoccupied with indiscriminate production and consumption. (2) It includes the cost of damage caused by pollution as a positive factor in its calculation, while excluding the lost value of depleted natural resources and unpaid costs of environmental harm.

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Inflation

Back 139

A sustained, rapid increase in prices, as measured by some broad index (such as Consumer Price Index) over months or years, and mirrored in the correspondingly decreasing purchasing power of the currency.

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Who is most affected by inflation?

Back 140

Fixed-wage earners (and is a disincentive to save).

Front 141

Cost-Push Inflation

Back 141

A type of inflation due to wage increases that cause business to raise prices to cover higher labor costs, which leads to demand for still higher wages (the wage-price spiral).

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Demand-Pull Inflation

Back 142

A type of inflation that results from increasing consumer demand financed by easier availability of credit.

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Monetary Inflation

Back 143

A type of inflation caused by the expansion of the money supply, due to printing of more money by a government to cover its deficits.

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Core Inflation Rate

Back 144

The inflation rate of an economy after energy and food prices are removed.

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Hyperinflation

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Ruinously high increase, by 50% or more per month, in prices due to the near total collapse of a country's monetary system, rendering its currency almost worthless as a medium of exchange.

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Causes of Hyperinflation

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Mainly caused by excessive deficit spending (financed by printing more money) by a government, some economists believe the true cause is social breakdown and that its roots lie in political rather than economic causes.

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Deflation

Back 147

(1) A downturn in an economic cycle caused by circumstances, or brought about by government policies. The opposite of inflation. (2) The conversion of an economic factor, such as wages or retail prices, from a nominal amount to a real amount by cancelling the effects of inflation.

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Characteristics of Deflation

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(1) Increase in citizen's purchasing power due to falling prices. (2) Decrease in wages, or slow down in their increase, due to falling levels of unemployment. (3) Decrease in availability of credit due to higher interest rates and/or restricted money supply. (4) Decrease in imports due to lack of demand.

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Causes of Deflation

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Governments cause deflation usually to improve their balance of payments position and/or to prevent overheating of the economy by an accelerating rate of inflation. It is caused by either increasing taxes and/or interest rates, or by cutting down on government spending.

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Consumer Price Index (CPI)

Back 150

A measure of changes in the purchasing power of a currency and the rate of inflation. One of the best know lagging indicators.

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What does the CPI do?

Back 151

It expresses the current prices of a basket of goods and services in terms of the prices during the same period in a previous year, to show effect of inflation on purchasing power.

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Unemployment Rate

Back 152

The percentage of total workforce who are unemployed and are looking for a paid job. One of the most closely watched statistics because a rising rate is seen as a sign of a weakening economy that may call for a cut in interest rates. A falling rate, similarly, indicates a growing economy which is usually accompanied by higher inflation rates and may call for an increase in interest rates.

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Frictional Unemployment

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Temporary unemployment arising out of the inevitable time lags in the functioning of labor markets, such as the time taken in moving from one job to another.

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Seasonal Unemployment

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An elevated level of unemployment that is expected to occur at certain parts of the year. Less people visit amusement parks in winter months, which causes some of them to close down or cut the number of employees on staff until the warmer months.

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Cyclical Unemployment

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A change in employment levels that can be tied to cyclical economic change.

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Structural Unemployment

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Joblessness caused, by by lack of demand, but by changes in demand patterns or obsolescence of technology, and requiring retraining of workers and large investment in new capital equipment.

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Monetary Policy (or monetary regime)

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An economic strategy chosen by a government in deciding expansion or contraction in the country's money supply. Usually applied through the Central Bank, it plays the dominant role in control of the aggregate demand and, by extension, of inflation in an economy.

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3 major tools of monetary policy:

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(1) Buying/selling of national debt. (2) Changing credit restrictions. (3) Changing the interest rates by changing reserve requirements.

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Expansionary Monetary Policy

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A type of fiscal policy focused on increasing the size of a country's money supply in relation to demand, taking advantage of the increased capital to announce tax cuts and higher government expenditures to spur economic growth.

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Expansionary Monetary Policy (indirect method)

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Reducing interest rates and allowing increased discount window lending.

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Restrictive Monetary Policy

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A method used by the central bank to slow economic growth. The bank restrict liquidity, which lessens the amount of money and credit that banks can lend, thereby reducing the money supply by making loans, credit cards and mortgages more expensive. The effect is lower demand which slows economic growth and inflation.

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Fiscal Policy

Back 162

A government's revenue/taxation and spending policy designed to: (1) counter economic cycles in order to achieve lower unemployment, (2) achieve low or no inflation and (3) achieve sustained, but controllable, economic growth. Fiscal policies are based on the concepts of UK economist, John Maynard Keynes (1883-1946), and work independent of monetary policies.

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Expenditure exceeds revenue:

Back 163

Deficit spending, a way in which governments stimulate the economy during a recession.

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Revenue exceeds expenditure

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During periods of expansion, governments restrain a fast growing economy with higher taxes and aim for a surplus.

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Budget

Back 165

An estimate of costs, revenues and resources over a specified period, reflecting a reading of future financial conditions and goals. One of the most important administrative tools. Serves as (1) a plan of action for achieving quantified objectives, (2) standard for measuring performance and (3) device for coping with foreseeable adverse situations.

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Budget Deficit

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The amount by which actual expenses exceed planned expenses.

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Budget Surplus

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The amount by which planned expenses exceed actual expenses.

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National Debt

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Total outstanding borrowings of a central government comprising of internal (owed to national creditors) and external (owed to foreign creditors) debt incurred in financing its expenditures. Plays a crucial role in a country's financial system as government securities form an important part of the reserve of its financial institutions.

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Floating Debt

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A category of national debt comprised of short term borrowings, such as treasury bills, various ways-and-means advances and borrowings from the central bank.

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Funded Debt

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A category of national debt comprised of short-term debt converted into long-term debt.

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Unfunded Debt

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A category of national debt comprised of national savings certificates, savings bonds, premium bonds and securities repayable in foreign exchange (affects the country's balance of payments).

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Balanced Budget

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A government budget where the current expenditures equals current revenue.

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Exports

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Products of local origin sold to other countries.

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Export

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To send goods or services across nation frontiers for the purpose of selling and realizing foreign exchange.

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Imports

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Products of foreign origin brought into a country.

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Balance of Trade (BOT)

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The largest component of a country's current account in its balance of payments (BOP) accounts, that shows the difference between export earnings and import expenditure.

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Favorable BOT

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The amount realized from physical exports is more than the amount spent on physical imports.

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Unfavorable BOT

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The amount spent when physical imports is more than the amount realized on physical exports.

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Balance of Payment (BOP)

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A set of accounts that records a county's international transactions and which, because of double entry bookkeeping, always balances out with no surplus or deficit shown on an overall basis. BOP accounting serves to highlight a country's competitive strengths and weaknesses, and helps in achieving balanced economic growth.

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Component BOP accounts that can show a deficit:

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(1) Current Account - covers export and import of goods and services. (2) Capital Account - covers investment inflows and outflows. (3) Gold Account - covers gold inflows and outflows.

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Exchange Rate

Back 181

Price for which the currency of a country can be exchanged for another country's currency.

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Factors that influence exchange rate:

Back 182

(1) Interest rates. (2) Inflation rate. (3) Trade balance. (4) Political stability. (5) Internal harmony. (6) A high degree of transparency in the conduct of leaders and administrators. (7) The general state of the economy. (8) Quality of governance.

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Devaluation

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Planned, or market forced, reduction in the value of a currency's exchange rate. It may improve a country's balance of payments situation by boosting exports and reducing imports, but it worsens inflation for imported goods or those having significant import content.

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Revaluation

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(1) An upward adjustment in the value of currency with respect to another currency or a benchmark rate of exchange. (2) Upward adjustment in the book value of assets, caused usually by a devaluation of the currency in which their value is recorded in the accounts.

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Infrastructure

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(1) The basic, and usually permanent, framework which supports a superstructure and is supported by a substructure. (2) . Relatively permanent and foundational capital investment of a country, firm or project that underlies and makes possible all its economic activity. Includes administrative, telecommunication, transportation, utilities and waste removal/processing facilities. Sometimes includes education, health care, research & development and training facilities.

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Tariff

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Published list of fares, freight charges, prices, rates, etc.

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Characteristics of Money

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Acceptable, divisible, durable, limited supply, portable and uniform.

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Merger

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The result of combining two or more companies into one.

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Vertical Merger (or Vertical Integration)

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Integration of companies at different stages of production and/or distribution in the same industry. If a company acquires its input supplier it is called a backward integration. When it acquires its distribution chain it is called a forward integration.

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Horizontal Merger

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Merger of two or more companies with similar product lines (same industry businesses).

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Conglomerate

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Large corporation run as a single business, but made up of several firms (acquired through mergers or takeovers) supplying diverse goods and/or services.

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Takeover

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Assumption of control of another (usually smaller) firm through purchase of 51% or more of its voting shares or stock.

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Hostile Takeover

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Acquiring a firm despite the disapproval of, or open resistance from, its board of directors. The acquirer, or raider, usually takes the takeover offer direct to the target firm's stockholders (shareholders) or seeks their approval to remove the obstructing board members.

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Tender Offer

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(1) Bid or offer submitted in response to an invitation to bid (ITB) or request for tender. (2) Formal, open offer by publicly traded corporation to buy back its own outstanding securities at a stated price and within a stated time-frame. (3) Formal, open offer by a private or publicly-traded corporation to the shareholders of a publicly-traded corporation to buy their shares usually at and attractive premium above the share current market prices. Often the key element of a takeover strategy and usually subject to the bidder being able to purchase a minimum number of shares and an automatic expiration of the offer after a maximum number of shares have been acquired.

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Greenmail

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An anti-takeover strategy in which a corporation is forced to buy back its own shares at an inflated price to ward off a corporate raider who holds enough stock to pose a hostile takeover threat. A type of blackmail that nets a raider a handsome profit just for creating a takeover threat.

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Poison Pill

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An anti-takeover strategy in which a hostile takeover by a corporate raider is made prohibitively expensive or unattractive. Takes several forms: (1) Provision that makes all of the firm's debts immediately payable if the board of directors is changed. (2) Distribution of warrants or purchase rights for buying the firm's stock at a heavy (usually 50%) discount when a triggering event occurs, thus immediately diluting the raider's ownership interest and voting rights. (3) Issuance of a new series of preferred stock (preference shares) that gives stockholders/shareholders (not including the raider) the right to redeem them at a hefty premium after a takeover.

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Golden Parachute

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An anti-takeover strategy in which a huge bonus and/or lucrative contract is offered to a director or key employee to compensate for loss of office after a takeover or merger. It may also include stockholding (shareholding) in the new setup.

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White Knights

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A party that appears with a more palatable offer for taking over a firm when another entity (the Black Knight) has already made a bid deemed unwelcome by the target firm's management.

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Privatization

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An anti-takeover strategy in which the the stockholders or management try to acquire all of a firms stocks in order to return a publicly owned enterprise to private ownership and control.

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Leveraged Buyout (LBO)

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Takeover of a company or controlling interest in a company, using a significant amount of borrowed money. Often the target company's assets serve as collateral for the borrowed money.

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Strategic Planning

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The process of determining a company's long-term goals and then identifying the best approach for achieving those goals.

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Core competencies

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A body of skills, expertise, processes or relationships unique to an organization and difficult to replicate by its competitors that enables it to provide an uncommon value to its customers and employees. They tend to originate from the talents of the company's founders and then are advanced through the collective experience of the growing organization.

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Tactical Planning

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A systematic determination and scheduling of the immediate or short-term activities required in achieving the objectives of strategic planning. Used most often by middle managers and covers a 1-5 year time span.

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Operating Plan

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A short-term, highly detailed plan formulated by management to achieve tactical objectives. Usually covers a time span of 1 year or less and covers the day-to-day running of the business.

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Gantt Chart

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A type of bar-chart that shows both the scheduled and completed work over a period. A time-scale is given on the chart's horizontal axis and each activity is shown as a separate horizontal rectangle (bar) whose length is proportional to the time required (or taken) for the activity's completion. In project planning these charts show start/finish dates, critical/non-critical activities, slack time and predecessor-successor relationships. Also called a chronogram. Invented in 1917 by U.S. engineer and scientific-management pioneer, Henry L. Gantt

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Project Evaluation and Review Technique (PERT)

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A documentation tool (flow chart diagram) for plotting all the tasks and time-frames for the duration of a project including events, activities, slack time and critical path.

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Critical Path Method (CPM)

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Analysis tool for predicting events or time-frames that may cause disruption in the flow of production.

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SWOT Analysis

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Situation analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy.

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Organizational Structure

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The typically hierarchical arrangement of lines of authority, communications, rights and duties of an organization. How tasks are divided into resources.

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Organization Chart

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Visual representation of how a firm intends authority, responsibility and information to flow within its formal organizational structure.

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Four main factors or organizing a company:

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(1) Work specialization (division of labor), (2) chain-of-command, (3) unity of command and (4) management span.

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Sources of Power

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(1) Legitimate - based on the person's title, (2) Reward - control over rewarding employees, (3) Expert - based on a person's skill level and (4) Referent - based on how much a person is admired and people want to emulate them.

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The Four P's of Marketing (marketing mix)

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(1) Product, (2) Price, (3) Place and (4) Promotion

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Price Skimming

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Setting a high initial price for a product when quality is perceived as high.

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Penetration Pricing

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Setting a low initial price for a product or service.

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Odd-Even Pricing

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Psychological pricing to make consumers believe the prices if more appealing (i.e. $49.99 vs. $50.00).

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Discounting

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Reducing established prices.

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Exclusive Distribution

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Selling through one retail outlet in one geographic location.

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Intensive Distribution

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Selling through as many retail outlets as possible.

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Selective Distribution

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Selling through a few retail outlets in a few geographic locations.

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Basic functions of the Marketing team:

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(1) Buying, (2) Selling, (3) Transporting, (4) Storing, (5) Financing, (6) Standardizing, (7) Risk-taking and (8) Researching

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Consumer Orientation

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Marketing philosophy which focuses on the internal and external needs of a business' customers. Establishes and monitors standards of customer satisfaction and strives to meet the clientele's needs and expectations related to the product or service sold by the business.

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Customer Service Orientation

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Marketing philosophy which focuses on keeping customers satisfied.

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Profit Orientation

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Marketing philosophy which focuses on operating under the primary objective of making money.

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Societal Orientation

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Marketing philosophy which focuses on operating in the best interests of the society as a whole.

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Free-flow Layout

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A type of store layout in which there is no established traffic pattern.

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Grid Layout

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A type of store layout in which items are grouped by aisles and types of products.

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Loop Layout

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A type of store layout in which customer are exposed to the greatest amount of products by way of a clearly defined main aisle circling the store like a racetrack.

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Five types of utility to move goods from producer to consumer:

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Form, time, place, possession and information.

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Convenience Goods

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Frequently bought goods with little effort.

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Shopping Goods

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Goods bought after comparing price and quality.

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Production Goods

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Raw materials used to create a different product.

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Support Goods

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Accessory equipment and supplies used to assist in production of products.

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Four stages of Product Life-Cycle

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(1) Market introduction, (2) growth, (3) maturity and (4) saturation/decline.

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Most common financial issues:

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Under-capitalization, poor cash flow and inadequate expense control.

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More Demand/Supply Same

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Higher prices/Higher quantity

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Less Demand/Supply Same

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Lower price/Lower quantity

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More Supply/Demand Same

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Lower price/Higher quantity

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Less Supply/Demand Same

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Higher price/Lower quantity

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The Sherman Antitrust Act (1890)

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Prohibits activities designed to reduce competition; limits cartels and monopolies.

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Pure Food and Drug Act (1906) or the Food, Drug and Cosmetic Act (1938)

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Requires full disclosure of ingredients in products.

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The Clayton Act (1914)

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Prevention of monopolies; augments the Sherman Antitrust Act (1890) specifying conduct, enforcement, exemptions and remedial action.

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The Federal Trade Commission Act (1914)

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Prohibits unfair competition in commerce, seeks damages for injured customers and regulates trade rules.

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Norris-La Guardia Act (1932)

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Prohibits yellow dog contracts and courts from using injunctions to block non-violent union activities.

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The Wagner Act/National Labor Relations Act (1935)

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Bans interference with union formation, interference with collective bargaining, discrimination based on filing charges and encouraging/discouraging union membership.

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Robinson-Patman Act (1936)

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Prohibits anti-competitive practices, such as price discrimination.

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Taft-Hartley Act/Labor Management Relations Act (1947)

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Counter to pro-labor Wagner act banning coercing workers to bargain, barring employment based on union membership and striking to force employees to join.

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Labor Management Reporting and Disclosure Act/Landrum-Griffin Act (1959)

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Granted rights to union members to nominate candidates, vote in union elections, attend meetings and file paperwork with the Department of Labor.

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Title VII of the Civil Rights Act of 1964 (amended in 1972, 1991 and 1994)

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Prohibits discrimination based on race, color, religion, sex or nationality.

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Fair Packaging and Labeling Act (1966)

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FDA requirement for label information.

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Age Discrimination in Employment Act (1967, 1986 and 1990)

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Bans discrimination in employment based on age (over 40) and terminating only older employees when downsizing.

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Americans with Disabilities Act (1990)

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Employers cannot discriminate based on physical or mental disabilities and must make reasonable accommodations.