opportunity cost
the opportunity of giving up the second-best choice when making a decision
absolute advantage
the benefit a country has in a given industry when it can produce
more of a product than other nations using the same amount of resources
comparative advantage
the benefit a country has in a given industry if it can make products
at a lower opportunity cost than other countries
balance of trade
a basic measure of the difference in value between a nation's exports
and imports, including both goods and services
trade surplus
overage that occurs when the total value of a nation's exports is
higher than the total value of its imports
trade deficit
shortfall that occurs when the total value of a nation's imports is
higher than the total value of its exports
balance of payments
a measure of the total flow of money into or out of a country
balance of payments surplus
overage that occurs when more money flows into a nation than out of
that nation
balance of payments deficit
shortfall that occurs when more money flows out of a nation than into
that nation
exchange rate
a measurement of the value of one nation's currency relative to the
currency of other nations
countertrade
international trade that involves the barter of products for products
rather than for currency
foreign outsourcing
(also contact manufacturing)
contracting with foreign suppliers to produce products, usually at a
fraction of the cost of domestic production
importing
buying products domestically that have been produced or grown in
foreign nations
exporting
selling products in foreign nations that have been produced or grown domestically
foreign licensing
authority granted by a domestic firm to a foreign firm for the rights
to produce and market its product or to use its trademark/patent
rights in a defined geographical area
foreign franchising
a specialized type of foreign licensing in which a firm expands by
offering businesses in other countries the right to produce and market
its products according to specific operating requirements
direct investment
when firms either acquire foreign firms or develop new faculties from
the ground up in foreign countries
joint ventures
when two or more companies join forces-sharing resources, risks, and
profits, but not actually merging companies to pursue specific opportunities
partnership
a voluntary agreement under which two or more people act as co-owners
of a business for profit
strategic alliance
an agreement between two or more firms to jointly pursue a specific
opportunity without actually merging their businesses
-typically involve less formal, less encompassing agreements than partnerships
sociocultural differences
differences among cultures in language, attitudes, and values
infrastructure
a country's physical facilities that support economic activity
protectionism
national policies designed to restrict international trade, usually
with the goal of protecting domestic businesses
tariffs
taxes levied against imports
quotas
limitations on the amount of specific products that may be imported
from certain countries during a given time period
voluntary export restraints (VERs)
limitations on the amount of specific products that one nation will
export to another nation
embargo
a complete ban on international trade of a certain item, or a total
halt in trade with a particular nation
free trade
the unrestricted movement of goods and services across international borders
General Agreement of Tariffs and Trade (GATT)
an international trade treaty designed to encourage worldwide trade
among its members
World Trade Organization (WTO)
a permanent global institution to promote international trade and to
settle international trade disputes
World Bank
an international cooperative of 188 member countries, working
together to reduce poverty in the developing world
International Monetary Fund (IMF)
an international organization of 188 member nations that promotes
international economic cooperation and stable growth
trading bloc
a group of countries that have reduced or even eliminated tariffs,
allowing for the free flow of goods among the member nations
common market
a group of countries that have eliminated tariffs and harmonized
trading rules to facilitate the free flow of goods among member nations
North American Free Trade Agreement (NAFTA)
the treaty among the United States, Mexico, and Canada that
eliminated trade barriers and investment restrictions over a 15-year
period starting in 1994
European Union (EU)
the world's largest common market, composed of 28 European nations
ethics
a set of beliefs about right and wrong, good and bad
universal ethical standards
ethical norms that apply to all people across a broad spectrum of situations
business ethics
the application of right and wrong, good and bad, in a business setting
ethical dilemma
a decision that involves conflict of values; every potential course
of action has some significant negative consequences
code of ethics
a formal, written document that defines the ethical standards of an
organization and gives employees the information they need to make
ethical decisions across a range of situations
Whistle-blowers
employees who report their employer's illegal or unethical behavior
to either the authorities or the media
social responsibilty
the obligation of a business to contribute to society
stakeholder
any groups that have a stake- or personal interest- in the
performance and actions of an organization
consumerism
a social movement that focuses of 4 key consumer rights
1. right to be safe
2. right to be informed
3. the right to choose
4. the right to be heard
planned obsolescence
the strategy of deliberately designing products to fail in order to
shorten the time between purchases
Sarbanes-Oxley Act
federal legislation passed in 2002 that sets higher ethical standards
for public corporations and accounting firms
-key provisions limit conflict-of-interest issues and require
financial officers and CEOs to certify the validity of their financial statements
corporate philanthropy
all business donations to nonprofit groups, including money,
products, and employee time
cause-related marketing
marketing partnerships between businesses and nonprofit
organizations, designed to spike sales for the company and raise money
for the nonprofit
corporate responsibilty
businesses contributions to the community through the actions of the
business itself rather than donations of money and time
sustainable development
doing business to meet the needs of the current generation, without
harming the ability of future generations to meet their needs
carbon footprint
refers to the amount of harmful greenhouse gases that a firm emits
throughout its operations, both directly and indirectly
green marketing
developing and promoting environmentally sound products and practices
to gain a competitive edge
social audit
a systematic evaluation of how well a firm is meeting its ethics and
social responsibility goals
depository institutions
a financial intermediary that obtains funds by accepting checking and
savings deposits and then lending those funds to borrowers
credit union
a depository institution that is organized as a cooperative, meaning
that it is owned by its depositors
savings and loan association
a depository institution that has traditionally obtained most of its
funds by accepting savings deposits, which have been used primarily to
make mortgage loans
securities broker
A financial intermediary that acts as an agent for investors who want
to buy and sell financial securities
-brokers earn commissions and fees for the services they provide
securities dealer
a financial intermediary that participates directly in securities
markets, buying and selling stocks and other securities for its own account
investment bank
a financial intermediary that specializes in helping firms raise
financial capital by issuing securities in primary markets
Federal Reserve Act of 1913
the law that established the Federal Reserve System as the central
bank of the United States
Banking Act of 1933
the law that established the Federal Deposit Insurance Corporation
(FDIC) to insure bank deposits. It also prohibited commercial banks
from selling insurance or acting as investment banks
Securities Act of 1933
the first major federal law regulating the securities industry, it
requires firms issuing new stock in a public offering to file a
registration statement with the SEC
Securities and Exchange Commission
the federal agency with primary responsibility for regulating the
securities industry
Financial Services Modernization Act of 1999
an act that overturned the section of the Banking Act of 1933 that
prohibited commercial banks from selling insurance or performing the
functions of investment banks
common stock
the basic form of ownership in a corporation
capital gain
the return on an asset that results when its market price rises above
the price the investor paid for it
preferred stock
a type of stock that gives its holder preference over common
stockholders in terms of dividends and claims on assets
bond
a formal debt instrument issued by a corporation or government entity
maturity date
the date when a bond will come due
per value (of a bond)
the value of a bond at its maturity, what the issuer promises to pay
the bondholder when the bond matures
coupon rate
the interest paid on a bond, expressed as a percentage of the bond's
par value
current yield
the amount of interest earned on a bond, expressed as a percentage of
the bond's current market price
convertible security
a bond or share of preferred stock that gives its holder the right to
exchange it for a stated number of shares of common stock
financial diversification
a strategy of investing in a wide variety of securities in order to
reduce risk
mutual fund
an institutional investor that raises funds by selling shares to
investors and uses the accumulated funds to buy a portfolio of many
different securities
net asset value per share
the value of a mutual fund's securities and cash holdings minus any
liabilities, divided by the number of shares of the fund outstanding
exchange traded fund(ETF)
shares traded on securities markets that represent the legal right of
ownership over part of a basket of individual stock certificates or
other securities
primary securities market
the market where newly issued securities are traded
-where the firms that issue securities raise additional financial capital
secondary securities market
the market where previously issued securities are traded
public offering
a primary market issue in which new securities are offered to any
investors who are willing and able to purchase them
private placement
a primary market issue that is negotiated between the issuing
corporation and a small group of accredited investors
initial public offering (IPO)
the first time a company issues stock that may be bought by the
general public
underwriting
an arrangement under which an investment banker agrees to purchase
all shares of a public offering of an agreed-upon price
registration statement
a long, complex document that firms must file with the SEC when they
sell securities through a public offering
accredited investor
an organization or individual investor who meets certain criteria
established by the SEC and so qualifies to invest in unregistered securities
stock (or securities) exchange
an organized venue for trading stocks and other securities that meet
its listing requirements
market makers
securities dealers that make a commitment to continuously offer to
buy and sell the stock of a specific corporation listed on the NASDAQ
exchange or traded in the OTC market
over-the-counter (OTC) market
the market where securities that are not listed on exchanges are traded
electronic communications network (ECN)
an automated computerized securities trading system that
automatically matches buyers and sellers, executing trades quickly and
allowing trading when securities exchanges are closed
market order
an order telling a broker to buy or sell a specific security at the
best currently available price
limit order
an order to a broker to buy a specific stock only if its price is
below a certain level, or to sell a specific stock only if its price
is above a certain level
stock index
a statistic that tracks how the prices of a specific set of stocks
have changed
Dow Jones Industrial Average (DJIA)
an index that tracks stock prices of 30 large, well known US corporations
Standard and Poor's 500
a stock index based on prices of 500 major U.S. corporations in a
variety of industries and market sectors
management
achieving the goals of an organization through planning, organizing,
leading, and controlling organizational resources including people,
money, and time
planning
determining organizational goals and action plans for how to achieve
those goals
organizing
determining a structure for both individual jobs and the overall organization
leading
directing and motivating people to achieve organizational goals
controlling
monitoring performance and marketing adjustments as needed
top management
managers who set the overall direction of the firm, articulating a
vision, establishing priorities and allocating time, money, and other resources
middle management
managers who supervise lower-level managers and report to a higher
level manager
first-line (supervisory) manager
managers who directly supervise nonmanagement employees
technical skills
expertise in a specific functional area or department
human skils
the ability to work effectively with and through other people in a
range of different relationships
conceptual skills
the ability to grasp a big-picture view of the overall organization,
the relationships among its various parts, and its fit in the broader
competitive environment
Maslow's Hierarchy of Needs
a motivation theory that suggests that human needs fall into a
hierarchy and that as each need is met, people become motivated to
meet the next-highest need in the pyramid
Theory X and Theory Y
a motivation theory that suggests that management attitudes toward
workers fall into two opposing categories based on management
assumptions about worker capabilities and values
job enrichment
the creation of jobs with more meaningful content, under the
assumptions that challenging, creative work will motivate employees
expectancy theory
a motivation theory that concerns the relationship among individual
effort, individual performance, and individual reward
equity theory
a motivation theory that proposes that perceptions of fairness
directly affect worker motivation
strategic planning
high-level, long-term planning that establishes a vision for the
company, defines long-term objectives and priorities, determines broad
action steps, and allocates resources
tactical planning
more specific, shorter-term planning that applies strategic plans to
specific functional areas
operational planning
very specific, short-term planning that applies tactical plans to
daily, weekly, and monthly operations
contingency planning
planning for unexpected events, usually involving a range of
scenarios and assumptions that differ from the assumptions behind the
core plans
mission
the definition of an organization's purpose, values, and core goals,
which provides the framework for all other plans
SWOT analysis
a strategic planning tool that helps management evaluate an
organization in terms of internal strengths and weaknesses, and
external opportunities and threats
strategic goals
concrete benchmarks that managers can use to measure performance in
each key area of the organization
strategies
action plans that help the organization achieve its goal by forging
the best fit between the firm and the environment
organization chart
a visual representation of the company's formal structure
degree of centralization
the extent to which decision-making power is held by a small number
of people at the top of the organization
span of control
span of management, refers to the number of people a manager supervises
departmentalization
the division of workers into logical groups
line organization
organizations with a clear, simple chain of command from top to bottom
line-and-staff organizations
organizations with line managers forming the primary chain of
authority in the company, and staff departments working alongside line departments
line managers
managers who supervise that functions that contribute directly to
profitability: production and marketing
staff managers
managers who supervise the functions that provide advice and
assistance to the line departments
matrix organizations
organizations with a flexible structure that brings together
specialists from different areas of the company to work on individual
projects on a temporary basis
autocratic leaders
leaders who hoard decision-making power for themselves and typically
issue orders without consulting their followers
democratic leaders
leaders who share power with their followers, while they still make
final decisions, they typically solicit and incorporate input from
their followers
free-rein leaders
leaders who set objectives for their followers but give them freedom
to choose how they will accomplish those goals
human resource management
the management function focused on maximizing the effectiveness of
the workforce by recruiting world-class talent, promoting career
development, and determining workforce strategies to boost
organizational effectiveness
job analysis
the examination of specific tasks that are assigned to each position,
independent of who might be holding the job at any specific time
job description
an explanation of the responsibilities for a specific position
job specifications
the specific qualifications necessary to hold a particular position
internal recruitment
the process of seeking employees who are currently within the firm to
fill open positions
external recruitment
the process of seeking new employees from outside the firm
structured interviews
an interviewing approach that involves developing a list of questions
beforehand and asking the same questions in the same order to each candidate
probationary period
a specific time frame (typically 3 to 6 months) during which a new
hire can prove his or her worth on the job before he or she becomes permanent
contingent workers
employees who do not expect regular, full-time jobs, including
temporary full-time workers, independent contractors, and temporary
agency or contract agency workers
orientation
the first step in the training and development process, designed to
introduce employees to the company culture and provide key
administrative information
on-the-job training
a training approach that requires employees to simply begin their
jobs- sometimes guided by more experienced employees- and to learn as
they go
apprenticeships
structured training programs that mandate that each beginner serve as
an assistant to a fully trained worker before gaining full credentials
to work in the field
management development
programs to help current and potential executives develop the skills
they need to move into leadership positions
performance appraisal
a formal feedback process that requires managers to give their
subordinates feedback on a one-to-one basis, typically by comparing
actual results to expected results
compensation
the combination of pay and benefits that employees receive in
exchange for their work
wages
the pay that employees receive in exchange for the number of hours or
days that they work
salaries
the pay that employees receive over a fixed period, most often weekly
or monthly
benefits
noncash compensation, including programs such as health insurance,
vacation, and childcare
cafeteria-style benefits
an approach to employee benefits that gives all employees a set
dollar amount that they must spend on company benefits, allocated
however they wish within broad limitations
flextime
a scheduling option that allows workers to choose when they start and
finish their workdays, as long as they complete the required number of hours
compressed workweek
a version of flextime scheduling that allows employees to work a full
time number of hours in less than the standard workweek
telecommuting
working remotely-most often from home- and connecting to the office
via phone lines, fax machines, or broadband networks
Civil Rights Act of 1964
federal legislation that prohibits discrimination in hiring, firing,
compensation, apprenticeships, training, terms, conditions, or
privileges of employment based on race, color, religion, sex, or
national origin
Title VII
a portion of the Civil Rights Act of 1964 that prohibits
discrimination in hiring, firing, compensation, apprenticeships,
training, terms, conditions, or privileges of employment based on
race, color, religion, sex or national origin for employers with 15 or
more workers
Equal Employment Opportunity Commission (EOCC)
a federal agency designed to regulate and enforce the provisions of
Title VII
affirmative action
policies meant to increase employment and educational opportunities
for minority groups- especially groups defined by race, ethnicity, or gender
sexual harassment
workplace discrimination against a person based on his or her gender