Midterm #1

Midterm #1

Business: any activity that provides good and services to consumers for the purpose of making a profit.
1. External forces on Business
  1. Economy
    1. Systems: Planned: communism, socialism, capitalism: free market
    2. World Economic Goals
      1. Growth- GDP
        HIgh Employment
        Price stability- CPI
  2. Government
    1. Monetary Policy
      1. federal reserve
    2. Fiscal Policy
      1. taxing and spending
  3. consumer trends
  4. the pressure to be a good corporate citizen
    1. Social Responsibility and Ethics: take care of ALL stakeholders
      1. Employee attitudes: uneasy about the work they do, object to how they are treated, question correctness of management's directives
      2. Rationalizations: my behavior isn't really illegal; action is in everyone's best interests; everyone does it
      3. Organizational Behavior: shared values, top management held accountable, leaders should be role models, code of conduct
Goods are tangible; services are intangible and cannot be returned
Competition
1. Perfect Competition: many sellers, standardized product, many consumers
2. monopolistic competition: many sellers, differentiated product, many consumers
3. Oligopoly: few sellers, similar product, many consumers
4. Monopoly: very few sellers to all customers
Foreign Affairs
1. 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
  1. Balance of Trade: value of imports - value of exports
    1. Surplus: sells more than buys
      1. Deficit: buys more than sells
  2. Blance of Payments: amount of money coming in- amount of money going out; over time period
2. In-Franchise Agreement: company/franchiser grants foreign company the rights to use its brand name and sell its products
3. Outsourcing aka Contract Manufacturing: US company contracts with a local company in a foreign country to manufacture one of its products
  1. US company retains control of product design and development and puts its own label on it
4. Foreign Direct Investment: the formal establishment of business operations (ex. factory or office) on foreign soil)
5. Multinational Corporation:
  1. Pros: better, cheaper products, creates jobs, raises the standard of living in developing countries, increases cross-cultural understanding
  2. Cons: destroys jobs and lowers wages in home country workers, traditional lifestyle/values weakened or destroyed, irreversible damage to the environment
Forms of Business Ownership
1. Consider: control? Profits? liability? financial needs? set up? continuance?
2. Regular taxable corporations
  1. Regular C-corporation- double taxation
3. flow through entities
  1. sole proprietorship Partnership S-Corp LLC
Entrepreneur: someone who identifies a business oportunity and assumes the risl of creating and running a business to take advantage of it
1. WHY? be your own boss; achieve financial independence, creative freedom, use own skills and knowlege

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