Business Exam review

• Profit


  Revenue (profit from goods) - expenses
• Four ways to classify a business


  • Profit
  • Size and form of ownership
  • Goods and services
  • Channels of distribution
• Why is competition good for both consumers and producers


  Businesses must meet consumers' needs and wants (competition plays a significant role in a marketplace)
• Three economic resources


  • Natural: Materials that come from the earth. Many are non-renewable. Must use wisely
  • Labour - People who work to create goods and services. Extremely important to hire good people, and keep them happy
  • Capital: Money, buildings, equipment, factories, and money (big investments that last a long time)
• Five step decision making

  1. Determine what decision has to be made

  2. Identify alternatives

  3. Evaluate pros and cons of each alternative

  4. Make a decision

  5. Evaluate the decision
• Interdependence


  Rely on others to perform. One business often will depend on another business for its economic resources
• Supply


  Quantity people are willing to sell at certain prices
• Demand


  Quantity people are willing to buy at certain prices
• Law of supply and demand

  As prices increase, quantity supplied will increase. As prices increase, consumers buy less (decrease in demand)
• Conditions that create demand and supply

  • Cost of producing a good or service
  • Price consumers are willing to pay & production costs
  • Change in the number of producers
  • Changes in technology
  • Consumer interest (marketing)
  • Hype (marketing)
  • Reasonable & competitive prices
  • Accessible (if restricted then prices can soar)...concerts; fashion items;sports events;etc
• Sole Proprietorship


  Owned by one person (under owners name, declare business income on personal income tax return)
• Sole Proprietorship


  • Easy and cheap to start, all the profits are your's
  • Personally liable for all debts , potential to incur all losses
• Partnership


  Operated by multiple people who want to share the costs and responsibilities
• General Partnership


  • All partners have all liabilities (can be responsible for each other's debts)
• Limited Partnership


  • Partners are only responsible for paying back what they invested in the partnership
• Partnership


  • Pool talents, decision making, share risks
  • Arguments/varying opinions, share profits, free loaders
• Franchise


  • Franchiser: Licenses the rights to its business name and design
  • Franchisee: Buys license to operate a ready made business
• Franchise


  • Brand recognition!
• Unlimited liability


  You're personally liable for all debts of a business, potential to incur all the losses
• Limited liability


  Each member is only responsible for paying back what they invested in the business
• General partnership


  All the partners have unlimited liability and they can be responsible for each other's debts
• Limited partnership


  Partners are only responsible for paying back what they invested in the partnership
• Corporation


  Have separate legal status than the people who work for the business (is like a separate person)
• Three types of corporations

  • Private: Few people have control, and stocks aren't on a stock exchange
  • Public: Raise money by selling shares on stock exchanges
  • Crown: Business operated by the government (CBC, VIA Rail)
• Six international business structures

  • Joint venture: 2 businesses partnering together (should be beneficial for both businesses)
  • International franchise: Franchises can expand to various countries, selling the rights to franchisee's anywhere in the world. Have to be willing to somewhat adapt.
  • Strategic alliance: Agreements between businesses where each commits resources to achieve a common set of objectives.
  • Mergers: 2 or more companies join together permanently [until one decides to sell off the other]. Join companies to create an even stronger one.
  • Offshoring: Some of a company's operations are in another country because of access to: cheaper & skilled labour, and large markets (China)
  • Multinational corporations: Business that operates in many different countries.
• Why do companies use offshoring

  This is because there may be access to cheaper labour, skilled labour, and large markets (like China)
• Ethics


  Help determine what is right and wrong. Help people decide on the best course of action when they are unsure what to do.
• Ethical dilemma


  Difficult moral choice between 2 or more options. Usually pros and cons on either side of decisions.
• Whistle blowing


  Employee exposes legal or ethical violations. Basically, draw attention to a company's actions.
• Corporate social responsibility


  Actions that go beyond what is expected for the environment and society. Can include things like; enjoyable/accomodating work environment (daycare, fitness), fair pay, environmental programs, charity work, community involvement
• Three main portions of Corporate Social Responsibility

  • Charity work (donations/community involvement)
• Domestic


  Selling items produced in the same country
• International


  Selling of items produced in other countries
• Four benefits of international trade

  • Access to markets
  • Cheaper labour
  • Increased quality and/or quantity
  • Access to resources
• Access to markets


  Relied on for economic survival - International markets are often larger than domestic markets (8 billion people), adapt or have a global product, standardized item offered in the same form globally.
• Cheaper labour


  Higher profits, biggest expense in a business - Reduce costs of production through cheaper labour, potential costs and damaging consequences that can occur (image/public/backlash)
• Increased quality and/or quantity

  Get the best parts from countries that specialize (take advantage of what other countries have to offer) - international appeal equals more sales
• Access to resources


  Natural (iron ore from Canada), human (factory in Mexico for cheap labour), capital (machinery from Japan)
• Global product/standardized


  Some companies change their products depending on the country they are in. For example: McDonalds changes their food based upon certain cultures, traditions, and tastes that people in that country like.
• Adapting


  Some companies change their products depending on the country they are in. For example: McDonalds changes their food based upon certain cultures, traditions, and tastes that people in that country like.