Chap 1-5

business
any activity that seeks to provide goods and services to others while operating at a profit
goods
tangible products such as computers, food, clothing, cars, and appliances
services
intangible products such as education, health care, insurance, recreation, and travel
entrepreneur
a person who risks time and money to start and manage a business
revenue
the total amount of money a business takes in during a given period by selling goods and
services
profit
the amount of money a business earns above and beyond what it spends fro salaries and other
expenses
loss
when a business' expenses are more than its revenues
risk
the chance an entrepreneur takes of losing time and money on a business that may not prove
profitable
standard of living
the amount of goods and services people can buy with the money they have
quality of life
the general well-being of a society in terms of its political freedom, natural environment,
education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy
that other goods and services provide
stakeholders
all the people who stand to gain or lose by the policies and activities of a business and whose
concerns the business needs to address
outsourcing
contracting with other companies to do some or all of the functions of a firm, like its production
or accounting tasks

nonprofit organization
an organization whose goals do not include making a personal profit for its owners or organizers
factors of production
the resources used to create wealth: land, labor, capital, entrepreneurship, and knowledge
business environment
the surrounding factors that either help or hinder the development of businesses
technology
everything from phones and copiers to computers, medical imaging devices, personal digital
assistants, and the various software programs that make business processes more effective,
efficient, and productive
productivity
the amount of output you generate given the amount of input
e-commerce
the buying and selling of goods over the internet
database
an electronic storage file for information
identity theft
the obtaining of individuals' personal information such as Social Security and credit card
numbers, for illegal purposes
empowerment
giving frontline workers the responsibility, authority, freedom, training, and equipment they need
to respond quickly to customer requests
demography
the statistical study of the human population with regard to its size, density, and other
characteristics such as age, race, gender, and income
economics
the study of how society chooses to employ resources to produce goods and services and
distribute them for consumption among various competing groups and individuals
microeconomics
the part of economics study that looks at the behavior of people and organizations in particular
markets
macroeconomics
the part of economics study that looks at the operation of a nation's economy as a whole

resource development
the study of how to increase resources and to create the conditions that will make better use of
those resources
capitalism
an economic system in which all or most of the factors of production and distribution are
privately owned and operated fro profit
supply
the quantity of products that manufacturers or owners are willing to sell at different prices at a
specific time
demand
the quantity of products that people are willing to buy at different prices at a specific time
market price
the price determined by supply and demand
perfect competition
the degree of competition in which a large number of sellers produce very similar products that
buyers nevertheless perceive as different
oligopoly
a degree of competition in which just a few sellers dominate the market
monopoly
a degree of competition in which only one seller controls the total supply of a product or service,
and sets the price
socialism
an economic system based on the premise that some, if not most, basic businesses should be
owned by the government so that profits can be more evenly distributed among the people
brain drain
the loss of the best and brightest people to other countries
communism
an economic and political system in which the government makes almost all economic decisions
and owns almost all the major factors of production
free-market economies
economic systems in which the market largely decides what goods and services will be
produced, who will get them, and how the economy will grow

command economies
economic systems in which the government largely decides what goods and services will be
produced, who will get them, and how the economy will grow
mixed economies
economic systems in which some allocation of resources is made by the market and some by the
government
gross domestic product
the total value of final goods and services produced in a country in a given year
unemployment rate
the number of civilians at least 16 years old who are unemployed and tried to find a job within
the prior four weeks
inflation
a general rise in the prices of goods and services over time
deflation
a situation in which prices are declining
stagflation
a situation when the economy is slowing but prices are going up anyhow
consumer price index
monthly statistics that measure the pace of inflation or deflation
business cycles
the periodic rises and falls that occur in economies over time
recession
two or more consecutive quarters of decline in the gross domestic product
depression
a severe recession, usually accompanied by deflation
fiscal policy
the federal government's efforts to keep the economy stable by increasing or decreasing taxes or
government spending
importing
buying products from another country
exporting
selling products to another country

free trade
the movement of goods and services among nations without political or economic barriers
absolute advantage
the advantage that exists when a country has a monopoly on producing a specific product or is
able to produce it more efficiently than all other countries
balance of trade
the total value of a nation's exports compared to its imports measured over a particular period
trade surplus
a favorable balance of trade; occurs when the value of a country's exports exceeds that of its
imports
trade deficit
an unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its
exports
licensing
a global strategy in which a firm (the licensor) allows a foreign company (the licensee) to
produce its product in exchange for a fee (a royalty)
exchange rate
the value of one nation's currency relative to the currencies of other countries
tariff
a tax imposed on imports
import quota
a limit on the number of products in certain categories that a nation can import
embargo
a complete ban on the import or export of the certain product, or the stopping of all trade with a
particular country
North American Free Trade Agreement (NAFTA)
agreement that created a free-trade area among the United States, Canada, and Mexico
ethics
standards of moral behavior that is, behavior accepted by society as right verses wrong
whistleblowers
insiders who report illegal or unethical behavior
corporate social responsibility (CSR)
A business's concern for the welfare of society

Quota/ Embargo/ Dumping

Limits the number of units of a particular product that can be imported into a country (quota).
Prohibits trade in a particular product (embargo). When a business /country sells products less
than what it cost to produce them.
North America Free Trade Agreement (NAFTA)
Agreement that eliminates most tariffs and trade restrictions on agricultural and manufactured
products to encourage trade among Canada, the United States, and Mexico.
Licensing / Franchising
A trade agreement in which one company--the licensor--allows another company--the licensee-to use its company name, products, patents, brands, trademark, raw materials, and/or production
processes in exchange for a fee or royalty. , - A form of licensing in which a company-the
franchiser- agrees to provide a franchise the name, logo, methods of operation, advertising,
products, and other elements associated w/ the franchiser's business, in return for a financial
commitment and the agreement to conduct business in accordance with the franchiser's standard
of operations.
Strategic Alliance
A partnership formed to create competitive advantage on a worldwide basis.
Database
A collection of data organized in a manner that allows access, retrieval, and use of that data.
Intranet
An internal network similar to the Internet that is accessible only by authorized personnel; used
to access.
E-business
Carrying out the goals of business through utilization of the internet.
Business to Business (B2B) / Customer to Customer(C2C)
Provides goods and services to other businesses (B2B). Individuals buying and selling goods to
one another online (C2C).
Customer Relationship Management (CRM)
The overall process of building and maintaining profitable customer relationships by delivering
superior customer value and satisfaction.
Sole Partnerships / Partnerships / Corporation
Businesses owned and operated by one individual (sole partnerships). An association of 2 or
more persons to carry on a business for profit (partnerships). A legal entity, created by the state,
whose assets and liabilities are separate from its owner (corporation).

General / Limited Partnership

Involves a complete sharing in the management of a business (general partnership). Has one
general partner, who assumes unlimited liability, and at least one limited partner, whose liability
is limited to his or her investment to business (limited partnerships).
Stock
Owned by many individuals and organizations who owns shares of the business.
Dividends
Profits distributed in the form of cash payments.
Private / Public Corporation
Owned by just one or a few people who are closely involved in managing the business (private).
Stock anyone may buy, sell, or trade (public).
Initial Public Offering (IPO)
Public corporation by selling stock so that it can be traded in public markets.
Board of Directors
Elected by stockholders to oversee the general operation of the corporation, sets long-range
objectives of the corporation.
Limited Liability Company (LLC)
Ownership that provides limited liability and taxation like a partnership but places fewer
restrictions on members.
Merger / Acquisition
The combination of two companies (usually corporations) to form a new business (merger). The
purchase of one company by another, usually by buying its stock (acquisition).
Entrepreneurship
The process of creating and managing a business to achieve desired objectives.
Small Business
Independently owned and operated and is not dominant in its competitive area doesn't employ
more than 500 people.
Small Business Administration (SBA)
Independent agency of federal government that offers managerial and financial assistance to
small businesses.
Under-capitalization
Lack of funds to operate a business normally.

Business Plan
A precise statement of the rationale for the business and a step-by-step explanation of how it will
achieve its goals.
Intrapreneurs
Individuals in large firms who take responsibility for the development of innovations within the
organization.

Chap 6
sole proprietorship
business owned, and usually operated by a single individual.
sole proprietorship advantages
ease of formation, greater control and flexibility, no specific corporate records to keep or file,
potential financial/tax benefit of combined business and personal finances
sole proprietorship disadvantages
unlimited liability, potential difficulty in borrowing money
partnership
type of business entity in which two or more entities (partners) share the ownership and the
profits and losses of the business.
partnership advantages
more owners contribute capitol, greater ability to increase sales, market the business, and
generate income, shared financial responsibility, partners likely willing to work very hard, utilize
complementary skills, "two heads are better than one"
partnership disadvantages
need the "right" partner, must share control and profits, difference in opinion on company's
decision
partnership agreement
formalizes the relationship between business partners.
parts of a partnership agreement
capital contributions, responsibilities of each partner, decision- making process, shares of profits
or losses, departure of partners, addition of partners.
general partnership
default arrangement for a partnership, simplest form.
Limited Partnership
two distinctions of partners. To encourage investors who do not want to loose more than they
invested.

Limited Partners
are as involved as investors and are personally liable only up to the amount of their investment in
the business and must not actively participate in any decisions of the business.
General Partners
full owners of the business, are responsible for all day-to-day business decisions, and remain
liable for all debts and obligations of the business.
Corporation
a specific form of business organization that is legally formed under state laws. Considered a
separate entity from its owners, therefore has legal rights like an individual (can own property,
assume liability, pay taxes, enter into contracts, and can sue and be sued)
corporate structure
shareholders, board of directors, corporate officers, chief executive officers, chief financial
officer/ corporate security/ chief operating officer.
S Corporation
a regular corporation that has elected to be taxed under special section of the International
Revenue Code called subchapter S. They do not pay corporate income taxes. They pay taxes
through individual tax returns, only owe income tax based on their proportionate share of
business profits they receive.
Limited Liability Company
distinct type of business that combines corporate advantages of limited liability with the tax
advantages inherent in partnerships. Often used used by professional corporations formed by
accountants, attorneys, doctors, and others.
Not- for- profit corporations
An incorporated business that does not seek a net profit. Receive limited liability when the
become incorporated and are established as a separate legal entity. Can not be organized for any
person's private gain. tax exempt with 501(C)(3) status.
Cooperative
a business that is owned and governed by members who use its products and services, not by
outside investors. Motivated to provide services to people with common interests and/or needs
and are not motivated by profits.
Merger
two companies come together to form one company. Friendly and mutually agreed on
Acquisition
One company takes over another company/ buys out another company. The purchased company
ceases to exist and it operates and trades under the buying company's name.

Synergy
affect achieved when two companies combine, the result is better than each company could
achieve individually.
Horizontal Merger
two companies that share the same product lines and markets in direct competition with each
other combine.
Vertical Merger
two companies that have a company/ customer relationship combine. (ex. ice cream shop merges
with cone factory)
merger disadvantages
nearly two thirds don't achieve greater market value, revenues and profits suffer because day-today activities are neglected while the companies are combined, corporate cultures may clash,
communications may break down, new division of responsibilities can be vague, power struggle,
employees may leave.

Chap -7
management
the process used to accomplish organizational goals through planning, organizing, leading, and
controlling people and other organizational resources
planning
a management function that includes anticipating trends and determining the best strategies and
tactics to achieve organizational goals and objectives
organizing
a management function that includes designing the structure of the organization and creating
conditions and systems in which everyone and everything work together to achieve the
organization's goals and objectives
leading
creating a vision for the organization and guiding, training, coaching, and motivating others to
work effectively to achieve the organization's goals and objectives
controlling
a management function that involves establishing clear standards to determine whether or not an
organization is progressing towards its goals and objectives, rewarding people for doing a good
job, and taking corrective action if they are not
vision
an encompassing explanation of why the organization exists and where it is trying to head

mission statement
an outline of the fundamental purposes of an organization (self-concept, philosophy, long-term
survival needs, customer needs, social responsibility, nature of the product/service)
goals
the broad, long-term accomplishments an organization wishes to attain
objectives
specific, short-term statements detailing how to achieve the organization's goals
SWOT analysis
a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and
threats
strategic planning
the process of determining the major goals of the organization and the policies and strategies for
obtaining and using resources to achieve these goals
tactical planning
the process of developing detailed, short-term statements about what is to be done, who is to do
it, and how it is to be done
operational planning
the process of setting work standards and schedules necessary to implement the company's
tactical objectives
contingency planning
the process of preparing alternative courses of action that may be used if the primary plans don't
achieve the organization's objectives
decision making
choosing among two or more alternatives
problem solving
the process of solving the everyday problems that occur. Problem solving is less formal than
decision making and usually calls for quicker action
brainstorming
coming up with as many solutions to a problem as possible in a short period of time with no
censoring of ideas
PMI
pluses, minuses, and implications

organization chart
a visual device that shows relationships among people and divides the organizations work; it
shows who reports to whom
top management
highest level of management, consisting of the president and other key company executives who
develop strategic plans
middle management
the level of management that includes general managers, division managers, and branch
managers who are responsible for tactical planning and controlling
supervisory management
managers who are directly responsible for supervising workers and evaluating their daily
performance
technical skills
skills that involve the ability to perform tasks in a specific discipline or department
human relations skills
skills that involve communication and motivation; they enable managers to work through and
with people
conceptual skills
skills that involve the ability to picture the organization as a whole and the relationship among its
various parts
staffing
a management function that includes hiring, motivating, and retaining the best people available
to accomplish the company's objectives
transparency
the presentation of a company's facts and figures in a way that is clear and apparent to all
stakeholders
autocratic leadership
leadership style that involves making managerial decisions without consulting others
participative (democratic) leadership
leadership style that consists of managers and employees working together to make decisions
free-reign leadership
leadership style that involves managers setting objectives and employees being relatively free to
do whatever it takes to accomplish those objectives

enabling
giving workers the education and tools they need to make decisions
knowledge management
finding the right information, keeping the information in a readily accessible place, and making
the information known to everyone in the firm
external customers
dealers, who buy products to sell to others, and ultimate customers (or end users), who buy
products for their own personal use
internal customers
individuals and units within the firm that receive services from other individuals or units

Chap 8
economics of scale
the situation in which companies can reduce their production costs if they can purchase raw
materials in bulk; the average cost of goods goes down as production levels increase
Fayol's Principles of Organization
unity of command, hierarchy of authority, division of labor, subordination of individual interests
to the general interests, authority, degree of centralization, clear communication channels, order,
equity, esprit de corps
Max Weber's Organization Theory
1) job descriptions 2) written rules, decision guidelines, and detailed records 3) consistent
procedures, regulation, and policies 4) staffing and promotion based on qualification
[BUREAUCRACY]
hierarchy
a system in which one person is at the top of the organization and there is a ranked or sequential
ordering from the top down of managers who are responsible to that person
chain of command
the line of authority that moves from the top of a hierarchy to the lowest level
bureaucracy
an organization with many layers of managers who set rules and regulations and oversee all
decisions
centralized authority
an organization structure in which decision-making authority is maintained at the top level of
management
decentralized authority

an organization structure in which decision-making authority is delegated to lower-level

managers more familiar with the local conditions than headquarters management could be
span of control
the optimal number of subordinates a manager supervises or should supervise
tall organization structure
an organizational structure in which the pyramidal organization chart would be quite tall because
of the various levels of management
flat organization structures
an organization structure that has few layers of management and a broad span of control
departmentalization
the dividing of organizational functions into separate units
line organization
an organization that has direct two-way lines of responsibility, authority, and communication
running from the top to the bottom of the organization, with all people reporting to only one
supervisor
line personnel
employees who are part of the chain of command that is responsible for achieving organizational
goals
staff personnel
employees who advise and assist line personnel in meeting their goals
matrix organization
an organization in which specialists from different parts of the organization are brought together
to work on specific projects but still remain part of a line-and-staff structure
cross-functional self-managed teams
groups of employees from different departments who work together on a long-term basis
networking
using communications technology and other means to link organizations and allow them to work
together on common objectives
real time
the present moment or the actual time in which something takes place
virtual corporation
a temporary networked organization made u of replaceable firms that join and leave as needed

benchmarking
comparing and organization's practices, processes, and products against the world's best
core competencies
those functions that the organization can do as well as or better than any other organization in the
world
digital natives
young people who have grown up using the internet and social networking
restructuring
redesigning an organization so that it can more effectively and efficiently serve its customers
inverted organization
an organization that has contacted people at the top and the chief executive officer at the bottom
of the organization chart
corporate culture
widely shared values within an organization that provide unity and cooperation to achieve
common goals
formal organization
the structure that details lines of responsibility, authority, and position; that is, the structure
shown on organization charts
informal organization
the system that develops spontaneously as employees meet and form cliques, relationships, and
lines of authority outside the formal organization

Chap 9
production
the creation of finished goods and services using the factors of production: land, labor, capital,
entrepreneurship, and knowledge
production management
the term used to describe all the activities managers do to help their firms create goods
operations management
a specialized area in management that converts or transforms resources (including human
resources) into goods and services
form utility
the value producers add to materials in the creation of finished goods and services
process manufacturing

the part of the production process that physically or chemically changes materials
assembly process
the part of the production process that puts together components
continuous process
a production process in which long production runs turn out finished goods over time
intermittent process
a production process in which the production run is short and the machines are changed
frequently to make different products
computer-aided design (CAD)
the use of computers in the design of products
computer-aided manufacturing (CAM)
the use of computers in the manufacturing of products
computer-integrated manufacturing (CIM)
the uniting of computer-aided design with computer aided manufacturing
flexible manufacturing
designing machines to do multiple tasks so they can produce a variety of products
lean manufacturing
the production of goods using less of everything compared to mass production
mass customization
tailoring products to meet the needs of individual customers
facility location
the process of selecting a geographic location for a company's operations
telecommuting
working from home via computer
facility layout
the physical arrangement of resources (including people) in the production process)
assembly-line layout
workers do only a few tasks at a time
modular layout
teams of workers combine to produce more complex units of the final product

fixed-position layout
allows workers to congregate around the product to be completed
process layout
similar equipment and functions are grouped together
materials requirement planning (MRP)
computer-based operations management system that uses sales forecasts to make sure that
needed parts and materials are available at the right time and place
enterprise resource planning (ERP)
a newer version of materials requirement planning that combines the computerized functions of
all the divisions and subsidiaries of the firm, such as finance, human resources, and order
fulfillment, into a single integrated software program that uses a single database
purchasing
the function in a firm that searches for high-quality material resources, finds the best suppliers,
and negotiates the best price for goods and services
just-in-time (JIT) inventory control
a production process in which a minimum of inventory is kept on the premises and parts,
supplies, and other needs are delivered just in time to go on the assembly line
quality
consistently producing what the customer wants while reducing errors before and after delivery
to the customer
Six Sigma quality
a quality measure that allows only 3.4 defects per million opportunities
statistical quality control (SQC)
the process some managers use to continually monitor all phases of the production process to
assure that quality is being built in the product from the beginning
statistical process control (SPC)
the process of testing statistical samples of product components at each stage of the production
process and plotting those results on a graph. Any variances from quality standards are
recognized and can be corrected if beyond the set standard
program evaluation and review technique (PERT)
a method for analyzing the tasks involved in completing a given project, estimating the time
needed to complete each task, and identifying the minimum time needed to complete the total
project
critical path
in a PERT network, the sequence of tasks that takes the longest time to complete

Gantt chart
bar graph showing production managers what projects are being worked on and what stage they
are in at any given time

Chap -10
intrinsic reward
the personal satisfaction you feel when you perform well and complete goals
extrinsic reward
something given to you by someone else as recognition for good work; extrinsic rewards include
pay increases, praise, and promotions
scientific management
studying workers to find the most efficient ways of doing things and then teaching people those
techniques
Taylor's approach to scientific management
time, methods, and rules of work
time-motion studies
studies, begun by Frederick Taylor, of which tasks must be performed to complete a job and the
time needed to do each task
principle of motion economy
theory developed by Frank and Lillian Gilbert that every job can be broken down into a series of
elementary motions
Hawthorne effect
the tendency for people to behave differently when they know they are being studied
Maslow's hierarchy of needs
theory of motivation based on unmet human needs from basic physiological needs to safety,
social, and esteem needs to self-actualization needs
motivators
in Herzberg's theory of motivating factors, job factors that cause employees to be productive and
that give them satisfaction
hygiene factors
in Herzberg's theory of motivating factors, job factors that can cause dissatisfaction if missing
but that do not necessarily motivate employees if increased
theory X management

average person dislikes work, workers must be bossed around, motivated by fear and money
theory Y management
average person likes work, workers seek additional responsibility, workers like to be uniquely
rewarded, people are creative
theory Z
long term employment, collective decision making, individual responsibility for outcomes of
decision, slow evaluation/promotion, specialized career paths, holistic concern for families
goal-setting theory
the idea that setting ambitious but attainable goals can motivate workers and improve
performance if the goals are accepted, accompanied by feedback, and facilitated by
organizational conditions
management by objectives (MBO)
a system of goal setting and implementation; involves a cycle of discussion, review, and
evaluation of objectives among top and middle-level managers, supervisors, and employees
expectancy theory
Victor Vroom's theory that the amount of effort employees exert on a specific task depends on
their expectations of the outcome
reinforcement theory
theory that positive and negative reinforces motivate a person to behave in certain ways
equity theory
the idea that employees try to maintain equity between inputs and outputs compared to others in
similar positions
job enrichment
a motivational strategy that emphasizes motivating the workers through the job itself
job enlargement
a job enrichment strategy that involves combining a series of tasks into one challenging and
interesting assignment
job rotation
a job enrichment strategy that involves moving employees from one job to another