Madison Williams

Business Management Notes

Chapter 1

Key terms
Management: The process of accomplishing the goals of an organization through the effective
use of people and other resources
Planning: Involves analyzing information and making decisions about what needs to be done
Organizing: Concerned with determining how plans can be accomplished most effectively and
arranging resources to complete work
Staffing: Focuses on finding individuals with the right skills to do the work
Leading: Requires working with employees to ensure they are motivated and have the
resources needed to help carry our plans and get the work done
Controlling: Involves evaluating results to determine if the companies objectives have been
accomplished as planned
Manager: Completes all five management functions on a regular basis and has the authority
over other jobs and people
Supervisor: A manager whose main jobs is to direct the work of employees
Executive: A top-level manager who spends almost all of his or her time on management
functions and decisions that affect the entire company
Middle Manager: Completes specialized work in one management function or is responsible for
a specific part of the company’s operations
Industrial revolution: The era of the eighteenth and nineteenth centuries in which machine
power replaced human and animal power in the production process
Management science: The careful, objective study of management decisions and procedures in
order to improve the operation of businesses and organizations
Classical management: The way work is organized and the procedures used to complete a job
in order to increase worker productivity
Administrative management: Identifies the most effective practices for organizing and managing
a business
Behavioral management: Directed at organizational improvement through understanding
employee motivation and behavior
Quality management: A total commitment by everyone in an organization to improve the quality
of procedures and products by reducing waste, errors, and defects
Business competition: The rivalry among companies for customers
Management strategy: A carefully developed overall approach to leading an organization

Notes
1.1
- With control comes the responsibility to makes sure the business is running smoothly
and possible sacrifices
- High-level managers: planning, problem solving, making business wide decisions
 - Employee/manager relationships are important, there has been a more recent shift of
respect between the two. This has show to make businesses work better
- Five functions: planning, organizing, staffing, leading, controlling
- Different levels of management: executives, middle-managers, supervisors

1.2
- “Managers,” in a sense, have been around forever : Incas and Egyptians
- The industrial revolution, with shifting to machinery instead of manual labor, the need for
managers become even more important
- Seconds industrial revolution lead to 8 hour days, multiple shifts, increased pay
- Four primary management theories: classical management, administrative management,
behavioral management, quality manager
1.3
- The workforce in America is very diverse: age, gender, ethnicity, and education
- Technology is changing the way businesses run, machines and software is able to take
the place of employees/assist employees
- Businesses are always competing nationwide, this affects prices and efficiency
- Technology has made it easier for people to communicate within their company and
promote their business
- Management will change based on the size, age, location/s, and operation or product
- Moving into management require you to take on more responsibilities and a different
workload

Chapter 2

Key Terms
Management Role: A common set of activities that makes up an important part of a manager's
job
Management Principles: The fundamental guidelines for the decisions and actions of managers
Subordinate: Any individual who is subject to the authority and control of another person
Performance Review: A procedure used to evaluate the work and accomplishment of an
employee and provide feedback on performance
Work Schedules: Documents that identify the tasks to be done, employees assigned to the
work, and the time frame for completion of each task
Time Management: Involves managing work schedules to achieve maximum productivity
Quality Control: The process of making sure work meets acceptable standards
Work Coach: An experienced manager who meets regularly with a new manager to provide
feedback and advice
Management Information System: A computer-based system that stores, organized, and
provides information about a business
What-if Analysis: A systematic way to explore the consequences of specific choices using
computer software
Problem: A difficult situation requiring a solution
Symptom: A sign or indication of something that appears to be the problem
Contingency Plan: An alternative course of action to be followed if a specific problem arises

Notes
2.1
- Managers have to make sure work gets done by delegating properly, they have to figure
out how to motivate employees
- Communicators, relationship builders, and decision makers have shown to make the
best and more effective managers
- Planning includes people, money, facilities, equipment, and materials. This step leads to
the other management functions
- Six management principles of effective managers: commitment to the success of the
organization, responsibility over plans to meet their goals, identify resources needed and
ensure their availability, achieve goals efficiently by organizing work, understanding the
importance of employees and balance their goals with the company’s goals, monitor
activities and look for ways to improve
2.2
- Supervisors are responsible for making sure plans developed by the company are
fulfilled by the employees
- Jobs of supervisors: Communicate directions to employees effectively, communicate
employees concerns to management, improve employee performance, motivate
employees, use resources well
- When you become a supervisors your workload changes, most new supervisors struggle
to switch from their regular work to management tasks
2.3
- Use data/records to understand what works and does not work to make better decisions,
business research
- Managers must be able to look at all possible outcomes of decisions
- Problem solving steps: Identify the problem, gather important information, determine
multiple solutions, evaluate each solution, select the best solution, implement that
solution, evaluate whether or not it worked and fix what didn’t

Chapter 3

Key terms
Leader: Earns the respect and cooperation of employees to effectively accomplish the work of
the organization
Leadership: The ability to influence individuals and groups to cooperatively achieve common
goals
Human Relations: How well people get along with each other when working together
Power: The ability to control behavior
Position Power: Comes from the position the manager holds in the organization
Reward Power: Power based on the ability to control rewards and punishments
Expert Power: Power given to people because of their superior knowledge about the work
Identity Power: Power is given to people because others identify with and want to be accepted
by them
Self-understanding: An awareness of your attitudes and opinions, your leadership style, your
decision-making styles, and your relationships with other people
Hard Skills: Can be learned and are related to how to do a specific jos, such as working with a
spreadsheet or preparing a financial report
Soft Skills: Traits related to an individual’s character, attitude, and personality, which greatly
influence how he or she gets along with others at work
Team Building: Getting people to support the same goals and work well together to accomplish
them
Personal Network: People outside of the business environment, such as family, friends,
neighbors, and other acquaintances
Professional Network: Coworkers, managers from other businesses, and other types of
professionals
Leadership Style: The general way a manager treats and supervises employees
Autocratic Leader: Gives direct, clear, and precise orders with detailed instructions as to what,
when, and how work is to be done
Democratic Leader: One who encourages workers to share in making decisions about their
work and work-related problems
Open Leader: Gives little or no direction to employees
Situational Leader: Understands employees and job requirements and matches actions and
decisions to the circumstances
Employee Assistance Programs: Provide confidential individual assistance including counseling
and support services for employees experiencing serious personal or family issues
Rules: Prescribed guides for actions and conduct
Work Rules: Regulations created to maintain and effective working environment in a business
Labor Union: An organization of workers formed to represent tier common interests in improving
wages, benefits, and working conditions
Labor Agreement: The contract between managements and the union identifying rights and
responsibilities of the business and its employees

Notes
3.1
- Effective leadership is one of the most important skills for a manager to have
- One characteristic of a leader is creating a work environment that is motivating and
productive
- Even non-managers can hold power if others find them to be more knowledgeable or
supportive
3.2
- As a manager you need to understand yourself as well as others, you should reflect on
and know your leadership style
- A manager should work individually with employees as well as the group as a whole
- Initiating team building is important
- As a young, starting out employee soft skills are very beneficial
 - Poor communication will lead to other problems
- Just knowing facts is not the same as being able to problem solve, this is a skill
managers need to develop to successfully lead
3.3
- Managers who feel the need to closely manage their employees may feel as if their
employees will not complete tasks if they are not micromanaged
- Limited managers give their employees more independence and control
- Flexible managers adjust their how they face different situations based on specific
circumstance
3.4
- Work/life balance is vital in a work environment, thought sometimes personal problems
may make it difficult to do your work well
- Rules in a company are necessary for the success of all involved
- Companies must also have clear repercussions for violations of rules

Chapter 4

Key Terms
Business Plan: A written description of the nature of the business, its goals and objectives, and
how they will be achieved
Competitive Advantage: The special capabilities of a company that allow it to create a product
or service that is measurably better than any competing company
Strategic Planning: Long-term and provides broad goals and direction for the entire business
Operational Planning: Short-term and identifies specific goals and activities for each part of the
business
SWOT Analysis: The examination of the organization's internal strengths and weaknesses as
well as the external opportunities and threats
Mission: Specific statement of the business’s purpose and direction
Vision: The company’s reason for existing
Goal: A specific statement f a result the business expects to achieve
Budget: A written financial plan for business operations developed for a specific period of time
Schedule: A time plan for reaching objectives
Standard: A specific measure against which something is judged
Policies: Guidelines used in making decisions regarding specific, recurring situations
Procedure: A sequence of steps to be followed for performing a specific task
Organization Chart: an illustration of the structure of an organization, major job classifications,
and the reporting relationships among the organization's personnel.
Responsibility: The obligation to do an assigned task
Authority: The right to make decisions about work assignments and to require other employees
to perform assigned tasks
Empowerment: The authority given to individual employees to make decisions and solve
problems they encounter on their jobs with the resources available to them
Accountability: The obligation to accept responsibility for the outcomes of assigned tasks
Unity of Command: Each employees reports to one–and only one–supervisor at a time or for a
particular task
Chain of Command: Refers to the hierarchy of the organization, from the highest level to the
lowest level
Span of Control/Span of Management: Used interchangeably to describe the number of
employees that any one manager supervises to effectively implement an organization’s goals
Departmentalization: Where senior managers make conscious decisions on how to group
employees that serve a similar need for the company
Line Organization: All authority and responsibility can be traced in a direct line from the top
executive down to the lowest employee level in the organization
Line-and-staff Organization: Managers have direct control over the units and employees they
supervise but have access to staff specialists for assistance
Matrix Organization: Organizes employees into temporary work teams to complete specific
projects while working in the same functional area
Team Organization: Divides employees into permanent work teams
Self-directed Work Teams: In which team members together are responsible for the work
assigned to the team
Centralized Organization: A few top managers do all major planning and decision making
Decentralized Organization: A large business divides into smaller operating units, and
managers who head the units have almost total responsibility and authority for operations
Flattened Organization: Business with fewer levels of management than traditional structures

Notes
4.1
- Lack of planning can lead to loss in profit and the downfall of a business
- Business plans can be used to set clear goals and objectives
- Creating a competitive advantage can lead a company to greater success
- There are multiple steps to effective planning in a business
4.2
- A budget is used to help managers plan and determine goals
- Schedules and deadlines can benefit the company’s ability to accomplish their goals
- Setting a standard for all employees and having rules/policies lead to the businesses
greater success
- Making a plan, creating a step by step process to accomplish objectives
- Conducting research to understand what has worked in the past and look at what may
work in the future
4.3
- Divisions of work makes its so people can focus on their specific department, managers
organize each department
- Managers must plan and organize all facilities and supplies
- Though managers have more authority over others they also take on the added
responsibility
4.4
- There two primary organizational structures; departmentalization and line organization
 - Other structures are matric and team organizations
- Traditional companies may use a centralized style of organization while other have
moved to a decentralized style of organization or a flattened style

Chapter 5

Key Terms
Work Team: A group of individuals who cooperate to achieve a common goal
Motivation: A set of factors that influences the actions taken by an individual to accomplish a
goal
Operations: The major ongoing activities of a business
Operations Management: Involves effectively directing the major activities of a business to
achieve its goals
Process Improvement: The efforts to increase the effectiveness and efficiency of specific
business operations
Physiological Needs: Things required to sustain life, such as food and shelter
Security Needs: Involve making sure you and those you care about are safe and free from harm
Social Needs: Include the need to belong, to interact with others, to have friends, and to love
and be loved
Esteem Needs: Include the desire for recognition and respect from others
Self-actualization: The need to grow emotionally and intellectually, to be creative, and to
achieve your full potential
Achievement Need: People with high achievement need take personal responsibility for their
own work, set personal goals, and want immediate feedback on their work
Affiliation Need: People with high affiliation need are concerned about their relationships with
others and work to get along well and fit in with a group
Power Need: People with high power need want to influence and control others and to be
responsible for a group’s activities
Hygiene Factors: Job factors that dissatisfy when absent but do not contribute to satisfaction
when they are present
Motivators: Factors that increase job satisfaction
Quantity Standard: The expected amount of work to be completed
Quality Standard: The expected consistency in production or performance
Time Standard: The established amount of time needed to complete an activity
Profit: Income minus costs
Cost Standard: The predetermined cost of performing an operation or producing a good or
service, an effective way of helping businesses maintain profitability
Variance: A difference between current performance and the standard
Inventory: All materials and products a business has on hand for use in production and available
for sale
Just-in-time (JIT) Inventory Control: A method of inventory control whereby the company
maintains very small inventories and obtains materials just in time for use
Credit: The provision of goods or services to a customer with an agreement for future payments
Notes
5.1
- Staffing is the responsibility of finding employees fit for the job that will benefit your
company
- Leading involves guiding your employees to accomplishing set goals
- In most organizations people are part of a team to accomplish more specific goals by
working together
- Leading consists of problem solving, consensus building, analyzing finances, effective
communication, motivating employees, and managing operations
5.2
- Some employees have specific needs/wants while there are overarching human needs
that employers should meet to optimize productivity
- To make change easier on employees employers can plan, communicate, involve,
educate, and support employees through times of company change that may be
uncomfortable
5.3
- Though each management function has its own unique purpose, they all work together
to be successful
- To create an efficient environment companies set quantity, quality, time, and cost
standards
- To analyze the company's growth managers can look and compare their current
standpoint to a standard or past performance
5.4
- If a company's inventory is too high they will end up losing money, if it is too low they will
not have enough raw materials to meet customers needs
- To minimize theft companies can implement theft controls
- Employers should also put importance into making sure their work environment is safe
for employees in order to reduce costs related to employees health

Chapter 6

Key Terms
Business: An organization that produces or distributes a good or service for profit
Production: Involves making a product or providing a service
Marketing: Include the activities between businesses and customers involved in buying and
selling goods and services
Finance: Deals with all of the money matters involved in running a business
Good-Producing Businesses: Produce goods used by other businesses, organizations,
governments, or consumers
Service Businesses: A type of business that primarily use labor to offer mostly intangible
products to satisfy consumer needs
Industry: Often used to refer to all business within a category doing similar work
Innovation: A new idea or new implementation of an exciting idea
Global Competition: The ability of businesses from one country to compete with similar
businesses in other countries
Domestic Goods: Products made by firms in the United States
Foreign Goods: Products made by firms in other countries
Effectiveness: Making the right decisions about what products or services to offer customers
and the best ways to produce and deliver them
Efficiency: Producing products and services quickly, at low cost, without wasting time and
materials
Output: The quantity produced within a given time
Productivity: Producing the largest quantity in the least amount of time by using efficient
methods and modern equipment
Downsize: Reducing the amount and variety of goods and services produced and the number of
employees needed to produce them
Empowerment: Letting workers participate in determining how to perform their work tasks and
offer ideas on how to improve the work process
Gross Domestic Product (GDP): The total market value of all goods and services produced in a
country in a year
Underground Economy: Income that escapes being recorded in the GDP
Entrepreneur: Someone who starts, manages, and owns a business
Franchise: A legal agreement in which an individual or small group of investors purchases the
right to sell a company’s product or service under the company’s name and trademark
Franchisor: The parent company of a franchise agreement that provides the product or service
Franchisee: The distributor of a franchised product or service

Notes:
6.1
- There are steps in the manufacturing and selling process
- 1. Production, 2. Marketing, 3. Finance
- Supply and demand plays an important role in prices and production
- Supply : how much on an item there is, demand : amount of people who want the item
- Two major kinds of business : goods-producing and service
6.2
- New ideas can change the entire world: the invention of personal computers has
changed the way businesses and people operate
- Other countries have begun to produce more at cheaper prices, this has led the US to
buy more foreign products over time
- Working towards running a business in the most effective and efficient way possible is
something managers often focus on
- Analyzing customers buying habits, needs, wants, etc. can help companies better
themselves
- Working towards efficiency : Specialization, technology and innovation, reorganization
6.3
 - The government compares the GDP of the US compared to past years and other
countries
- The well-being of citizens is also and indicator of how well a country is doing
economically
- Small businesses, companies that are operated by one of a few individuals, are
abundant in the US
- As a business owner you risk failure, this can be affected by price changes, style
change, competition, and economic conditions

Chapter 7

Key Terms
Baby Boom Generation: TPeople born during the high birth rate period between 1945 and 1964
Generation X: People born during the low birth rate period between 1965 and 1980
Generation Y: People born between the higher birth rate period between 1981 and 1997
Frost Belt: The colder states in the north and northeast
Sun Belt: The warmer states in the south and southwest
Rust Belt: The north central and northeastern states where major manufacturing firms once
dominated
Labor Force: Includes most people aged 16 or over who are available for work, whether
employed or unemployed
Labor Participation Rate: The percentage of the adult population that is in the labor force
Glass Ceiling: An invisible barrier to job advancement
Sticky Floor Syndrome: The inability of workers to move up from these jobs
Comparable Worth: Paying workers equally for jobs with similar but not identical job
requirements
Values: Underlying beliefs and attitudes
Telecommute: The ability to communicate in the form of the Internet, email, mobile phones, and
fax
Sustainability: Using strategies that consider the needs of the environment, society, and the
economy to meet present needs without compromising the ability of the future generations to
meet their needs
Recycling: Reusing products and packaging whenever possible
Ethics: Refers to standards of moral conduct that individuals and groups set for themselves,
defining what behavior they value as right or wrong
Business Ethics: A collection of principles and rules that define right and wrong conduct for an
organization
Code of Ethics: A formal, published collection of values and rules that reflect the firm’s
philosophy and goals
Social Responsibility: The duty of a business to contribute to the well-being of society
Stakeholders: Any individuals or groups that are affected by the firm’s actions, such as owners,
customers, suppliers, employees, creditors, governments, and the publics
Nongovernmental Organizations: Use lobbying, publicity, and pressure tactics to influence
businesses to alter their activities
Ethical Framework: Guidelines for ethical decision making

Notes
7.1
- Growth rate is determined by birth rate, death rate, and level of immigration
- People are constantly moving, within the US and from outside
- The labor force consists of people over 16 who are available for work, not including full-
time students, full-time homemakers, or retirees
- The job markets is greatly affected by the economy, population, and technology
- Minimum wage, unemployment benefits, financial/food aid, and subsidized medical care
can help people living below the poverty line
- Equality in the workplace continues to be a difficulty in the US
7.2
- Values in the US are always developing, recently family ideals have shifted
- In 2014: women made up 42% of managers but made 78 cents for every dollar a man
made on average
- Encouraging employees to be part of decisions, improving health, incentives for worker
safety, providing leave for employees to take care of sick family members, have kids,
adopt, etc.
- Environmentally conscious businesses have bloomed
7.3
- Businesses set their own principles and rules not required by law to try to promote a
healthy and safe work environment
- Ethics is an important concept to understand when running a business
- Setting future generations up for success is something we need to think of currently

Chapter 8

Key Terms
Economics: The area of study that relates to producing and using good and services that satisfy
human wants
Economic Wants: The desire for scarce goods and services
Noneconomic Wants: Desires for nonmaterial things that are not scarce, such as sunshine,
friendship, and happiness
Utility: The ability of a good or service to satisfy a want
Producer: Anyone who creates a utility
Factors of Production: Land (natural resources), labor, capital goods, and entrepreneurship
Natural Resources: Anything provided by nature that positively contributes to the productive
ability of a country
Labor: The human effort, either physical or mental, that goes into the production of goods and
services
Human Capital: The accumulated knowledge and skills of human beings – the total value of
each person’s education and acquired skills
Capital Goods: Buildings, tools, machines, and other equipment that are designed to transform
resources into other goods but that do not directly satisfy human wants
Capital Formation: The production of capital goods
Consumer Goods and Services: Those that directly satisfy people's economic wants
Economic System: An organized way to decide how to use productive resources; that is, to
decide what, how, and for whom goods and services will be produced
Market Economy: An economic system in which individual buying decisions in the marketplace
together determine what, how, and for whom goods and services will be produced
Command Economy: An economic system in which a central planning authority, under the
control of the country’s government, owns most of the factors of production and determines who
produces goods and services, what is produces, and when and how
Mixed Economy: An economic system that uses aspects of a market and a command economy
to make decisions about who produces goods and services
Privatization: The transfer of authority to provide a good or service from a government to
individuals or privately owned businesses
Capitalism: And economic-political system in which private citizens are free to go into business
for themselves, to produce whatever they choose to produce, and to distribute what they
produce
Socialism: A political-economy system in which the government controls the use of the country’s
factors of production
Communism: Extreme socialism, in which all of almost all of the nation’s factors of production
are owned by the government
Private Property: Items of value that individuals have the right to own, use, and sell
Profit: Incentive as well as the reward for producing goods and services
Demand: The number of products that will be bought at a given time at a specific price point
Supply: The number of like products that will be offered for sale at a given time and at a specific
price point
Competition: The rivalry among sellers for consumers’ dollars
Economic Growth: when a country’s output exceeds its population growth
Consumer Price Index (CPI): A measure of the average change in prices of consumer goods
and services typically purchased by people living in urban areas
Recession: A decline in the GDP that continues for six months of more
Inflation: The rise in prices caused by an inadequate supply of goods and services
Business Cycles: Patterns of irregular but repeated expansion and contraction of the GDP
Depression: A long and severe drop in the GDP

Notes
8.1
- Business benefit the economy by creating and distributing goods and services that are
wants and needs of people
- Four types of utility: form, place, possession, and time
- Four factors of production: Natural resources, labor, capital goods, entrepreneurship
8.2
 - Productive resources are scarce in comparison to the populations wants, economic
decisions must be made to conserve and produce
- The primary economic systems: Market economy, command economy, and mixed
economy
- Political systems and economic systems go hand in hand
8.3
- Profit is calculated by subtracting total costs of production from total received from
customers who purchased the product
- Supply and demand help control pricing
- Price plays a role in competition and vise versa
8.4
- Economic strength is correlated with a country’s strength
- Ways to encourage economic growth: increase percentage of people in the workforce,
increase productivity by improving human capital, increase supply, improve technology,
redesign work procedures, increase sales to foreign countries, decrease purchases from
foreign countries
- Recession, inflation, and depression are all problems related to economics

Chapter 9

Key Terms
International Business: Business activities that occur between two or more countries
World Trade Organization (WTO): An international organization that creates and enforces the
rules governing trade among countries
Trading Bloc: A group of two or more countries that agree to remove all restrictions between
them on the sales of goods and services
European Union (EU): An advanced form of trading bloc
Euro: The merged national currencies of the EU
North American Free Trade Agreement (NAFTA): An agreements between Canada and the
United States with Mexico which created the world’s largest trading bloc by removing import
taxes and other barriers to trade among the three nations
International Monetary Fund (IMF): Major international institution whose purpose is to help
countries that are facing serious financial difficulties in paying for their imports or repaying loans
World Bank: Major international institution which provides low-cost, long-term loans to less-
developed countries to develop basic industries and facilities, such as road and electric power
plants
Exporting: Involves selling its products or services to buyers in another country
Importing: Buying goods or services made in a foreign country
International Licensing: When one company allows a company in another country to make and
sell products according to certain specifications
Joint Venture: Two or more firms share the costs of doing business and also share the profits
Wholly Owned Subsidiary: When the firm set up a business abroad on its own without any
partners
Strategic Alliances: Firms agree to cooperate on certain aspects of business while remaining
competitors on other aspects
Multinational Firm: A firm that owns or controls production or services facilities in more than one
country
Home Country: The country in which the business has its headquarters
Host Country: The foreign location where it has facilities
Parent Country: Company headquarters
Subsidiaries: The foreign branches, if registered as an independent legal entities
Tariffs: Taxes on foreign goods to protect domestic industries and to earn revenue
Dumping: The practice of selling goods in a foreign market at a price that is below cost or below
what it charges in its home country
Quota: Limits the quantity or value of units permitted to enter a country
Nontariff Barriers: Nontax methods of discouraging trade
Emargo: When the government bans companies from doing business with particular countries
Sanction: A milder form of an embargo that bans specific business ties with a foreign country
Exchange Rate: The value of one countries currency expressed in the currency of another
country
Culture: The customs, beliefs, values, and patterns of behavior of the people of a country or
group
Low-Context Culture: People communicate directly and explicitly (ie. the US)
High-Context Culture: Communication tends to occur through nonverbal signs and indirect
suggestions (ie. Japan)
Comparative Advantage Theory: To gain a trade advantage, a country should specialize in
products or services that it can provide more efficiently than can other countries
Product Life Cycle Theory: Companies look for new markets when products are in the maturity
and decline stages of the product life cycle
Balance of Payments: An accounting statement where all international transactions are
recorded
Current Account: Records the value of goods and services exported and those important from
foreigners, as well as other income and payments
Capital Account: Records investment funds coming into and going out of a country

Notes
9.1
- Each country has differing rules around business and selling, to successfully do
international business companies need to understand these regulations
- Americans are reliant on foreign companies whether or not they are completely aware of
it
- US top trading partners – Exports: Canada 19%, Mexico 14.3%, China 7.7%. Imports:
China 19.6%, Canada 14.6%, Mexico 12.3%
- Top Exporter of Merchandise: China, Top Importer of Merchandise: United States, Top
Exporter of Commercial Services: United States, Top Importer of Commercial Services:
United States
9.2
 - Companies have figured out many different ways to profit by allying themselves with
competing companies and working with foreign companies
- Governments impose trade barriers to protect domestic employment, customers, infant
industries, and national security
- Although international trade is a large part of the economy there are many barriers that
discourage companies from trading internationally
- A key difference between international and domestic business is the differing currency
9.3
- Four life cycle stages: introduction, growth, maturity, and decline
- International trade stimulates a nation's economic growth

Chapter 10

Key Terms
Intrapreneur: An employee who is given funds and freedom to create a special unit or
department within a large company to develop a new product, process, or service
Business Plan: A written document that describes the nature of the business, the goals and
objectives, and how the goals and objectives will be achieved
Proprietorship: A business owned and managed by one person
Proprietor: the owner-manager of a proprietorship
Creditor: A person or business to which money is owed
Partnership: A business owned by two or more people
Partnership Agreement: A written agreement between two or more people identifying how the
partners will add capital, labor, or other assets and divide any profits or share any losses
Unlimited Financial Liability: A necessary plan for all the debts of the business, if the business
fails and some of the partners are unable to pay a share of the debt, one partner may have to
cover those partners’ shares
Limited Partnership: A partnership with at least one general partner who has unlimited liability
and at least one limited partner whose liability is limited to his or her investment
Corporation: A business owned by a group of people and authorized by the state in which it is
located to act as though it were a single person, separate from its owners
Charter: The official document through which a state grants the power to operate as a
corporation
Stockholders: The owners of a corporation
Board of Directors: The ruling body of a corporation
Officer: A top executive who is hired to manage the business
Close Corporation: One that does not offer its shares of stock for public sale
Open Corporation: One that offers its shares or stock for public sale
Agency Dilemma: When an agent, or someone who works for another, pursues his or her own
interest over the employer’s interest
Limited Liability Partnership: A partnership in which each partners liability is limited to his or her
investment in the partnership
Cooperative: A business owned and operated by its user-members for the purpose of supplying
themselves with goods and services
Limited Liability Corporation (LLC): A special type of corporation that is taxed as if it were a sole
proprietorship or partnership
Nonprofit Corporation: An organization that does not pay taxes and does not exist to make a
profit
Quasi-public Corporation: A business that is important to society but lack the profit potential to
attract private investors and thus is often operated by local, state, or federal governments

Notes
10.1
- Entrepreneurs must decide what type of business they want to start, whether that be a
sole proprietorship, partnership, or corporation
- When starting a business having a solid business plan is crucial, to get investors you
need a well thought out plan and goal, understanding the risks before you begin and
being proactive
- There are over 23 million proprietorship business in the US
- There are pros and cons to starting a proprietorship, some cons being having to manage
your own time, difficult management decisions, high risk
10.2
- Having a clear agreement is an important aspect of a partnership
- There are over 3 million partnerships in the US
- Some cons of a partnership: hard to gain capital, each partner must pay personal
income tax, bound to the partnership agreement, division of profits
10.3
- Corporations are much larger and play a role in the US and other countries
- Each state has its own laws in forming a corporation
- Steps to starting a corporation: naming the business, stating the purpose, investing,
paying incorporation costs. Once you begin you must get organized and handle voting
rights
- Management issues for corporations: regulated closely, taxation, charter restrictions
10.4
- There are subsets of each type of business named above: Limited liability, joint
ventures, cooperatives, nonprofit, quasi-public