Transcript Chapters 1-5, 7 and 8 - Riverside City College

EXAM
REVIEW
EXAM
REVIEW
Chapters 1-5,
7 and 8
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 01
Taking Risks
and Making
Profits within
the Dynamic
Business
Environment
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Entrepreneurship
and
Wealth Building
LG1
BUSINESS and
ENTREPRENEURSHIP
• Business -- Any activity that seeks to provide
goods and services to others while operating at a
profit.
• Entrepreneur -- A person who risks time and
money to start and manage a business.
• Success in business is often based on the
strategy of finding a need and filling it.
1-3
Matching Risk
with Profit
RISK
LG1
• Risk -- The chance an
entrepreneur takes of losing time
and money on a business that
may not prove profitable.
• Not all businesses make the
same amount of profit.
• Businesses take risks, but with
great risks could come great
profit.
Dualstar
worth $1B
1-4
The Competitive
Environment
LG5
USING EMPOWERMENT
to COMPETE in TODAY’S MARKET
• Customers want quality products at a good price
with excellent customer service.
• Because business is more customer-driven,
some managers give frontline employees more
decision-making power.
• Empowerment -- Giving frontline workers the
responsibility, authority, and freedom to respond
quickly to customer requests.
1-5
Responding to the
Various Business
Stakeholders
STAKEHOLDERS
LG1
• Stakeholders -- All the people who stand to gain
or lose by the policies and activities of a business
and whose concerns the businesses need to
address.
• Who are Stakeholders?
- Customers
- Community Members
-
-
Employees
Stockholders
Suppliers
Dealers
Media
Elected Officials
Bankers
Environmentalists
1-6
The Importance
of Entrepreneurs
to the Creation
of Wealth
FIVE FACTORS of PRODUCTION
LG2
1. Land
2. Labor
3. Capital – examples tools, machinery,
buildings
4. Entrepreneurship
5. Knowledge
• Entrepreneurs use what they’ve learned to
grow their businesses and increase wealth.
1-7
Responding to the
Various Business
Stakeholders
LG1
OUTSOURCING
and INSOURCING
• Outsourcing -- Contracting with other companies
(often in other countries) to do some of the firm’s
functions, like production or accounting. Jobs are
often lost.
• Insourcing -- Foreign companies opening offices
and factories in the United States.
1-8
Businesses Add
to the Standard of
Living and Quality
of Life
LG1
STANDARD of LIVING
• Standard of Living -- The
amount of goods and services
people can buy with the money
they have.
• The U.S. has one of the highest
standards of living in the world.
• Workers in other countries may
make more money, but prices for
products are higher.
Photo courtesy of Walmart Stores
1-9
Businesses Add
to the Standard of
Living and Quality
of Life
LG1
QUALITY of LIFE
• Quality of Life -- The general well-being of a
society in terms of its political freedom, natural
environment, education, healthcare, safety, amount
of leisure and rewards that add to personal
satisfaction.
1-10
Chapter 02
Understanding
Economics
and
How It Affects
Business
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
What Is
Economics?
LG1
The MAJOR BRANCHES of
ECONOMICS
• Economics -- The study of how society employs
resources to produce goods and services for
consumption among various groups and individuals.
• Macroeconomics -- Concentrates on the
operation of a nation’s economy as a whole. (exp.
effects of population growth on the economy.)
• Microeconomics -- Concentrates on the behavior
of people and organizations in markets for particular
products or services.
2-12
What Is
Economics?
RESOURCE DEVELOPMENT
LG1
• Resource
Development -The study of how to
increase resources
and create
conditions that will
make better use of
them.
2-13
How Businesses
Benefit the
Community
LG1
Adam Smith’s
INVISIBLE HAND THEORY
• As people improve their own situation in life,
they help the economy prosper through the
production of goods, services and ideas.
• Invisible Hand -- When self-directed gain leads to
social and economic benefits for the whole
community.
2-14
Understanding
Free-Market
Capitalism
CAPITALISM
LG2
• Capitalism -- All or most of the land, factories and
stores are owned by individuals, not the
government, and operated for profit.
2-15
How Free
Markets Work
LG2
FREE MARKETS in
Capitalist Countries
• Free Market -- Decisions about what and how
much to produce are made by the market.
• Consumers send signals about what they like
and how they like it.
• Price tells companies how much of a product
they should produce.
• If something is wanted but hard to get, the price
will rise until more products are available.
2-16
Key Economic
Indicators
LG5
Three important economic
indicators for the United States
• Gross Domestic Product (GDP) -- Total value of
final goods and services produced in a country in a
given year. As long as a company is within a
country’s border, their numbers go into the
country’s GDP (even if they are foreign-owned).
• Unemployment Rate -- The percentage of
civilians at least 16-years-old who are unemployed
and tried to find a job within the prior four weeks.
• Consumer Price Index (CPI) -- Monthly
statistics that measure the pace of inflation or
deflation.
2-17
Key Economic
Indicators
INFLATION
LG5
• Inflation -- The general rise in the prices of goods
and services over time.
• Disinflation -- When the price increases are slowing
(inflation rate declining).
• Deflation -- Prices are declining because too few
dollars are chasing too many goods.
• Stagflation -- Economy is slowing, but prices are
going up.
2-18
Chapter 03
Doing
Business in
Global
Markets
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Measuring
Global Trade
HOW to MEASURE GLOBAL TRADE
LG2
• Balance of Trade -- The total value of a nation’s
exports compared to its imports measured over a
particular period.
• Trade Surplus (Favorable) -- When the value of
a country’s exports is more than that of its imports.
• Trade Deficit (Unfavorable) -- When the value of
a country’s exports is less than that of its imports.
3-20
Strategies for
Reaching Global
Markets
LG3
Licensing
Least
KEY STRATEGIES for REACHING
GLOBAL MARKETS
Exporting
Franchising
Contract
Manufacturing
International
joint ventures
and strategic
alliances
Amount of commitment, control, risk and profit potential
Foreign
direct
investment
Most
3-21
Licensing
LICENSING
LG3
• Licensing -- When a firm (licensor) provides the
right to manufacture its product or use its trademark
to a foreign company (licensee) for a fee (royalty).
• Licensing can benefit a firm by:
- Gaining revenues it wouldn’t have otherwise
generated.
- Spending little or no money to produce or market
their products.
3-22
International Joint
Ventures and
Strategic Alliances
JOINT VENTURES
LG3
• Joint Venture -- A partnership in which two or more
companies join to undertake a major project.
• The benefits of joint ventures:
-
Shared technology and risk.
-
Shared marketing and management expertise.
-
Entry into markets where foreign companies are often not
allowed unless goods are produced locally.
3-23
Foreign Direct
Investment
FOREIGN DIRECT INVESTMENT
LG3
• Foreign Direct Investment (FDI) -- The buying of
permanent property and businesses in foreign
nations.
• Foreign Subsidiary -- A company owned in a foreign country
by another company called the parent company. The most common form
of FDI.
-
Primary Advantage: Parent company maintains complete control
over its technology or expertise.
-
Primary Disadvantage: Must commit funds and technology within
foreign boundaries.
3-24
Trade
Protectionism
TRADE PROTECTIONISM
LG5
• Trade Protectionism -The use of government
regulations to limit the
import of goods and
services.
• Advocates of
protectionism believe it
allows domestic
producers to survive,
grow and produce jobs.
3-25
Trade
Protectionism
TARIFFS
LG5
• Tariffs -- Taxes on imports,
making imported goods more
expensive.
• Two kinds of tariffs:
-
-
Protective – Raise the
retail price of imports so
domestic goods are
competitively priced.
Revenue – Raise money
for governments.
3-26
The World Trade
Organization
WORLD TRADE ORGANIZATION
LG5
• World Trade Organization (WTO) -Headquartered in Geneva, the WTO is an
independent entity of 153 member nations whose
purpose is to oversee cross-border trade issues and
global business practices. Mediate trade disputes.
3-27
Chapter 04
Demanding
Ethical and
Socially
Responsible
Behavior
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Ethics Begins
with Each of Us
LG2
FACING ETHICAL DILEMMAS
It can be a hard balance…with
equally unsatisfactory alternatives
• Ask yourself these
questions:
- Is it legal?
- Is it balanced?
- How will it make
me feel about
myself?
4-29
Managing
Businesses
Ethically and
Responsibly
ETHICS START at the TOP
LG3
• Organizational ethics begin at
the top.
• Effective corporate values
start with top managers and
develop throughout the
organization to include
employees.
• ethics-based approach to
decision making will normally
lead to higher tru.st and
cooperation
4-30
Setting
Corporate
Ethical
Standards
ETHICS CODES
LG4
• Not all US companies practices the same ethical standards.
• An increasing number of companies have adopted written
codes of ethics.
• Compliance-Based Ethics Code -- Emphasize preventing
unlawful behavior by increasing control and by penalizing
wrongdoers.
• Integrity-Based Ethics Code -- Define the organization’s
guiding values, create an environment that supports ethically
sound behavior and stress a shared accountability.
Integrity- based approach example: Budweiser’s
campaign “Drink responsibly” WHY????
4-31
Corporate
Social
Responsibility
LG5
Examples of Corporate Social
Responsibility
CORPORATE PHILANTHROPY
and SOCIAL INITIATIVES
• Corporate Philanthropy -- Includes charitable
donations.
• Corporate Social Initiatives -- Include enhanced
forms of corporate philanthropy.
4-32
Responsibility
to Investors
INSIDER TRADING
LG5
• Insider Trading -- Insiders using
private company information to
further their own fortunes or those of
their family and friends.
• Unethical behavior does financial
damage to a company and
investors are cheated.
Example – IBM Lotus development
4-33
Social Auditing
SOCIAL AUDITING
LG5
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing
socially responsible and responsive programs.
• Five Types of Social Audit Watchdogs –
• i.e outside groups
1)
2)
3)
4)
5)
Socially conscious investors
Socially conscious research organizations
Environmentalists
Union officials
Customers
4-34
Chapter 05
How to
Form a
Business
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Basic Forms of
Business
Ownership
MAJOR FORMS of OWNERSHIP
• Sole Proprietorship -- A business owned, and
usually managed, by one person. Generally the
easiest to establish.
• Partnership -- Two or more people legally agree to
become co-owners of a business.
• Corporation -- A legal entity with authority to act
and have liability apart from its owners.
5-36
Partnerships
MAJOR TYPES of PARTNERSHIPS
LG2
• General Partnership -- All owners share in
operating the business and in assuming liability for
the business’s debts.
• Limited Partnership -A partnership with one or
more general partners and
one or more limited
partners.
5-37
Partnerships
TYPES OF PARTNERS
LG2
• General Partner -- An owner (partner) who has
unlimited liability and is active in managing the firm.
• Limited Partner -- An owner who invests money in
the business, but enjoys limited liability. Limited
Liability means that liability for the debts of the
business is limited to the amount the limited partner
puts into the company; personal assets are not at
risk.
• Limited partner also means that the degree of
profit is limited to the amount of investment.
Based on partnership agreement
5-38
Corporate
Expansion:
Mergers and
Acquisitions
3 TYPES of
CORPORATE MERGERS
LG4
• Vertical Merger -- Joins two firms in different
stages of related businesses.
• Horizontal Merger -- Joins two firms in the same
industry and allows them to diversify or expand their
products.
• Conglomerate Merger -- Unites firms in
completely unrelated industries in order to diversify
business operations and investments.
5-39
Franchises
FRANCHISING
LG5
• Franchise Agreement -- An arrangement whereby
someone with a good idea for a business
(franchisor) sells the rights to use the business
name and sell a product or service (franchise) to
others (franchisees) in a given territory.
• More than 825,000 franchised businesses
operate in the U.S., employing approximately
17.5 million people.
5-40
Disadvantages
of Franchises
LG5
DISADVANTAGES of
FRANCHISING
• Large start-up costs
• Shared profit
• Management regulation
• Coattail effects - actions of other franchisees can
have an impact on the success or failure of a particular
franchisee's business.
• Restrictions on selling
• Fraudulent franchisors
5-41
Cooperatives
COOPERATIVES
LG6
• Cooperatives -- Businesses owned and controlled
by the people who use them– producers,
consumers, or workers with similar needs who pool
their resources for mutual gain. Common type is a
farm cooperative – like a vineyard!
• Worldwide, 750,000 co-ops serve 730 million
members – 120 million in the U.S.
• Members democratically control the business by
electing a board of directors that hires
professional management.
5-42
Chapter 07
Management
and
Leadership
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Managers’ Roles
Are Evolving
TODAY’S MANAGERS
LG1
• Younger and more
progressive.
- Growing numbers of women.
- Fewer from elite universities.
- more like facilitators than
supervisors.
• Emphasis is on teams and team
building.
• Main goal is not watching over
people to make sure they are
doing what they are told
7-44
Planning &
Decision Making
LG3
SETTING
GOALS and OBJECTIVES
• Goals -- The broad, long-term
accomplishments an
organization wishes to attain.
• Objectives -- Specific, shortterm statements detailing how
to achieve the organization’s
goals.
7-45
Planning &
Decision Making
LG3
STRATEGIC and TACTICAL
PLANNING
• Strategic Planning -- Done by top management
and determines the major goals of the organization
and the policies, procedures, strategies and
resources it will need to achieve them. These are
long-range goals.
• Tactical Planning -- The process of developing
detailed, short-term statements about what is to be
done, who is to do it and how. – dealing with a
specific market. These are operational goals
7-46
Planning &
Decision Making
LG3
OPERATIONAL and CONTINGENCY
PLANNING
• Operational Planning -- The process of setting
work standards and schedules necessary to
implement the company’s tactical objectives. – work
flow
• Contingency Planning --
The process of preparing
alternative courses of action
the firm can use if its primary
plans don’t work out.
7-47
Planning &
Decision Making
LG3
PLANNING ANSWERS
FUNDAMENTAL QUESTIONS
• What is the situation now?
SWOT Analysis – a planning tool
Analyzes the organization’s Strengths,
Weaknesses, Opportunities and Threats.
7-48
Planning &
Decision Making
SWOT MATRIX
LG3
Allowing the company to plan…
7-49
Leadership
Styles
LEADERSHIP STYLES
LG5
• Autocratic Leadership -Making managerial decisions
without consulting others – most
useful in emergency situations
• Free-Rein Leadership -Managers set objectives and give
employees a great deal of
freedom to decide for
themselves how to accomplish
those objectives.
.
7-50
Empowering
Workers
EMPOWERMENT
LG5
• Progressive leaders give employees the
authority to make decisions on their own without
consulting a manager.
• Enabling -- Giving workers the education and
tools they need to make decisions.
7-51
Managing
Knowledge
MANAGING KNOWLEDGE
LG5
• Knowledge Management -Finding the right information,
keeping the information in a
readily accessible place and
making the information known to
everyone in the firm.
• First step in knowledge
management is figuring out what
knowledge is most important to
the firm.
• Tries to keep people from
reinventing the wheel.
7-52
Chapter 08
Structuring
Organizations
for Today’s
Challenges
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Building an
Organization from
the Bottom Up
STRUCTURING an ORGANIZATION
LG1
• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
8-54
Fayol’s Principles
of Organization
LG2
Two Organization theorists
HENRI FAYOL’S PRINCIPLES
• Division of labor
• Unity of command
• Hierarchy of authority
• Managers authority to
make decisions
• Equity
8-55
Max Weber and
Organizational
Theory
MAX WEBER’S PRINCIPLES
LG2
• Employees just need to do what
they’re told.
• In addition to Fayol’s principles,
Weber emphasized:
- Job descriptions
- Strict written rules, decision
guidelines and detailed records
- Bureaucracy…example UPS
8-56
Turning
Principles into
Organization
Design
TYPICAL ORGANIZATION CHART
LG2
Organization charts shows who is accountable for the
completion of specific work and who reports to whom.
8-57
Benchmarking
and Core
Competencies
LG5
CORE COMPETENCIES
• Core Competencies -- The functions an
organization can do as well as or better than any
other organization in the world. It agrees to perform
these functions in-house, rather than outsourcing
8-58
Weighing the
Advantages and
Disadvantages of
Departmentalization
DEPARTMENTALIZATION
LG3
• Departmentalization -- Divides organizations into
separate units.
• Workers are grouped by skills and expertise to
specialize their skills.
8-59
Turning
Principles into
Organization
Design
BUREAUCRATIC ORGANIZATIONS
LG2
• Bureaucracy -- An organization with many layers of
managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information
passed down to lower-level employees.
• Bureaucracies are not very responsive to
customers can annoy customers.
8-60
Restructuring
for
Empowerment
LG5
• Inverted Organization -- An organization that has
contact people at the top and the CEO at the bottom
of the organizational chart.
• The manager’s job is to assist and support
frontline workers, not boss them.
8-61
Managing the
Informal
Organization
LG6
No organization can be effective without
Formal and Informal Organization.
• Formal Organization -- Details lines of
responsibility, authority and position.
• The formal system is often slow and
bureaucratic, but it helps guide the lines of
authority.
8-62
Managing the
Informal
Organization
FORMAL &INFORMAL
ORGANIZATION
LG6
• Informal Organization -- The system of
relationships that develop spontaneously as
employees meet and form relationships.
• Informal organization
helps foster
camaraderie and
teamwork among
employees.
8-63
Restructuring
for
Empowerment
LG5
TRADITIONAL and INVERTED
ORGANIZATIONS
8-64
EXAM 1
EXAM 1 Structure
58 questions total - 60 minutes to complete
300 points total
27 multiple choice x 6 pts each
28 T/F x 3 pts each
3 written x 18 pts each
Chap 1 : 3 x T/F and 3 x multiple choice
Chap 2: 4x T/F and 4 x multiple choice
Chap 3: 4x T/F and 4 x multiple choice
Chap 4: 3 x T/F and 3 x multiple choice
Chap 5: 4x T/F and 4 x multiple choice
Chap 7: 5 x T/F and 5 x multiple choice
Chap 8: 5 x T/F and 4 x multiple choice
5-65