business all profit-seeking activities and enter-

prises that provide goods and services necessary

to an economic system.

profits rewards for businesspeople who take

the risks involved to offer goods and services to customers.

factors of production four basic inputs for effec-

tive operation: natural resources, capital, human resources,

and entrepreneurship.

private enterprise system economic system that

rewards firms for their ability to identify and

serve the needs and demands of customers.

competition battle among businesses for consumer acceptance.

entrepreneur person who seeks a profitable

opportunity and takes the necessary risks to set

up and operate a business.

brand name, term, sign, symbol, design, or some

combination that identifies the products of one

firm and differentiates them from competitors’

offerings.

relationship management collection of activities

that build and maintain ongoing, mutually ben-

eficial ties between a business and its customers

and other parties.

outsourcing using outside vendors to produce

goods or fulfill services and functions that were

previously handled in-house or in-country.

not-for-profit- organization organization that has

primary objectives such as public service rather

than returning a profit to its owners.

natural resources all production inputs that are

useful in their natural states, including agricul-

tural land, building sites, forests, and mineral

deposits.

capital production inputs consisting of technology,

tools, information, and physical facilities.

human resources production inputs consisting of

anyone who works, including both the physical

labor and the intellectual inputs contributed by

workers.

entrepreneurship willingness to take risks to

create and operate a business.

capitalism economic system that rewards firms

for their ability to perceive and serve the needs

and demands of consumers; also called the pri-

vate enterprise system.

competitive differentiation unique combination of

organizational abilities, products, and approaches

that sets a company apart from competitors in the

minds of customers
private property most basic freedom under the

private enterprise system; the right to own,

use, buy, sell, and bequeath land, buildings,

machinery, equipment, patents, and various

intangible kinds of property

consumer orientation business philosophy that

focuses first on determining unmet consumer

needs and then designing products to satisfy

those needs.

branding process of creating an identity in con-

sumers’ minds for a good, service, or company;

a major marketing tool in contemporary business.

transaction management building and promoting

products in the hope that enough customers will

buy them to cover costs and earn profits

relationship era the business era in which firms

seek ways to build long-term relationships with

customers by managing every interaction.

technology business application of knowledge

based on scientific discoveries, inventions, and

innovations.

partnership form of business ownership in which

the company is operated by two or more people

who are co-owners by voluntary legal agreement.

strategic alliance partnership formed to create

a competitive advantage for the businesses

involved; in international business, a business

strategy in which a company finds a partner in

the country where it wants to do business.

diversity blending individuals of different genders,

ethnic backgrounds, cultures, religions, ages, and

physical and mental abilities to enhance a firm’s

chance of success

offshoring relocation of business processes to

lower-cost locations overseas.

nearshoring outsourcing production or services to

locations near a firm’s home base.

vision perception of marketplace needs and the

methods an organization can use to satisfy them

critical thinking ability to analyze and

assess information to pinpoint problems or

opportunities

creativity capacity to develop novel solutions to

perceived organizational problems.

chapter 2

business ethics standards of conduct and moral

values involving right and wrong actions arising

in the work environment

conflict of interest situation in which an

employee must make a decision about a busi-

ness’s welfare versus personal gain.

whistle-blowing employee’s disclosure to com-

pany officials, government authorities, or the

media of illegal, immoral, or unethical practices

committed by an organization.

code of conduct formal statement that defines

how the organization expects employees to

resolve ethical issues

stakeholders the customers, investors, employ-

ees, and public affected by or with an interest in

a company.

social responsibility business’s consideration of

society’s well-being and consumer satisfaction, in

addition to profits.

recycling reprocessing of used materials for reuse.

corporate philanthropy act of an organization

making a contribution to the communities in

which it earns profits.

consumerism public demand that a business

consider the wants and needs of its customers in

making decisions.

discrimination biased treatment of a job candi-

date or employee

sexual harassment unwelcome and inappropri-

ate actions of a sexual nature in the workplace.

Sarbanes-Oxley Act federal legislation designed

to deter and punish corporate and accounting

fraud and corruption and to protect the interests

of workers and shareholders through enhanced

financial disclosures, criminal penalties on

CEOs and CFOs who defraud investors, safe-

guards for whistle-blowers, and establishment

of a new regulatory body for public accounting

firms.

integrity adhering to deeply felt ethical principles

in business situations

social audits formal procedure that identifies

and evaluates all company activities that relate

to social issues such as conservation, employ-

ment practices, environmental protection, and

philanthropy

pollution environmental damage caused by a

company’s products or operating processes.

green marketing marketing strategy that pro-

motes environmentally safe products and produc-

tion methods.

product liability responsibility of manufactur-

ers for injuries and damages caused by their

products.

family leave granting up to 12 weeks of unpaid

leave annually for employees who have or adopt

a child, are becoming foster parents, are caring

for a seriously ill relative or spouse, or are them-

selves seriously ill.

Equal Employment Opportunity Commission

(EEOC) government agency created to increase

job opportunities for women and minorities and

to help end discrimination based on race, color,

religion, disability, gender, or national origin in

any personnel action.

sexism discrimination against members of either

sex, but primarily affecting women.

chapter 3

economics social science that analyzes the choices

people and governments make in allocating

scarce resources.

microeconomics study of small economic units,

such as individual consumers, families, and businesses.

macroeconomics study of a nation’s overall eco-

nomic issues, such as how an economy maintains

and allocates resources and how a government’s

policies affect the standards of living of its citizens.

demand willingness and ability of buyers to

purchase goods and services.

supply willingness and ability of sellers to pro-

vide goods and services

recession cyclical economic contraction that lasts

for six months or longer.

productivity relationship between the number of

units produced and the number of human and

other production inputs necessary to produce

them.

gross domestic product (GDP) sum of all goods

and services produced within a country’s bound-

aries during a specific time period, such as a

year.

inflation rising prices caused by a combination

of excess consumer demand and increases in

the costs of raw materials, component parts,

human resources, and other factors of ori-

duction.

monetary policy government actions to increase

or decrease the money supply and change bank-

ing requirements and interest rates to influence

bankers’ willingness to make loans.

fiscal policy government spending and taxation

decisions designed to control inflation, reduce

unemployment, improve the general welfare of

citizens, and encourage economic growth.

budget organization’s plan for how it will raise

and spend money during a given period of time.

demand curve graph of the amount of a product

that buyers will purchase at different prices; gen-

erally slopes downward to reflect larger quantities

likely to be purchased as prices decline.

supply curve graph of the amount of a product

that suppliers will offer for sale at different

prices; generally slopes upward to reflect larger

quantities likely to be offered for sale as prices

increase.

equilibrium price prevailing market price; the

point at which the quantity demanded of a prod-

uct equals the quantity supplied.

pure competition market structure, like that of

small-scale agriculture, in which large numbers

of buyers and sellers exchange homogeneous

products and no single participant has a signifi-

cant influence on price.

monopolistic competition market structure,

like that for retailing, in which large numbers

of buyers and sellers exchange relatively

well-differentiated (heterogeneous) products,

so each participant has some control over

price.

oligopoly market structure, like those in the air-

line and steel industries, in which relatively few

sellers compete and high start-up costs form

barriers that keep out most new competitors.

monopoly market structure in which a single seller

dominates trade in a good or service for which

buyers can find no close substitutes.

deregulation regulatory trend toward elimination

of legal restraints on competition in industries

previously served by a single firm in an attempt

to improve customer service and lower prices

through increased competition.

planned economy economic system in which strict

government controls determine business owner-

ship, profits, and resource allocation to accom-

plish government goals rather than those set by

individual firms.

socialism planned economic system

characterized by a government ownership and

operation of major industries.

communism planned economic system in which

private property is eliminated, goods are owned

in common, and factors of production and pro-

duction decisions are controlled by the state

mixed market economy economic system that

combines characteristics of both planned and

market economies in varying degrees, including

the presence of both government ownership and

private enterprise.

privatization recent international trend to convert

government-owned and –operated companies

into privately held businesses.

core inflation rate the underlying inflation rate of

the economy after energy and food prices are

removed.

deflation falling prices caused by a combination

of reduced consumer demand and decreases

in the costs of raw materials, component parts,

human resources, and other factors of production.

Consumer Price Index (CPI) monthly measure of

changes in retail price levels by comparisons of

changes in the prices of a “market basket” of

goods and services most commonly purchased

by urban consumers.

unemployment rate indicator of a nation’s

economic health, typically expressed as a per-

centage of the total workforce who are actively

seeking work but are currently unemployed.

budget deficit funding shortfall in which govern-

ment spends more than the amount of funds

raised through taxes and fees.

national debt money owed by government to

individuals, businesses, and government agen-

cies who purchase Treasury bills, Treasury notes,

and Treasury bonds sold to cover expenditures.

budget surplus excess funding that occurs when

government spends less than the amount of

funds raised through taxes and fees.

balanced budget situation in which total revenues

raised by taxes and fees equal total proposed

government spending for the year.

chapter 5

small business firm that is independently owned

and operated, is not dominant in its field, and

meets industry-specific size standards for income

or number of employees

business plan written document that provides

an orderly statement of a company’s goals, the

methods by which it intends to achieve those

goals, and the standards by which it will mea-

sure achievements.

Small Business Administration (SBA) federal

agency that aids small businesses by providing

management training and consulting, financial

assistance, and support in securing government

contracts.

business incubator organization that provides

temporary low-cost, shared facilities to small

start-up ventures.

franchising contractual agreement that specifies

the methods by which a dealer can produce and

market a supplier’s good or service.

sole proprietorship form of business ownership in

which the company is owned and operated by one person.

partnership form of business ownership in which

the company is operated by two or more people

who are co-owners by voluntary legal agreement.

corporation business that stands as a legal entity

with assets and liabilities separate from those of

its owner(s).

stockholder person or organization who owns

shares of stock in a corporation.

board of directors elected governing body of a

corporation.

merger combination of two or more firms to form

one company.

acquisition procedure in which one firm

purchases the property and assumes the

obligations of another.

home-based businesses firms operated from the

residence of the business owner.

microloans Small Business Administration-

guaranteed loans of up to $35,000 made to

start-ups and other very small firms.

Small Business Investment Company (SBIC)

business licensed by the Small Business

Administration to provide loans to small busi-

nesses.

set-aside program component of a government

contract specifying that certain government

contracts (or portions of those contracts) are

restricted to small businesses and / or to women-

or minority-owned companies.

franchisee small-business owner who contracts to

sell the good or service of a supplier (the franchi-

sor) in exchange for a payment (usually a flat

fee plus a percentage of sales).

franchisor business owner who permits the

franchisee to sell its products and use its

name, as well as providing a variety of mar-

keting, management, and other services in

return for the payment of various fees and a

percentage of sales.

S corporation modified form of the traditional

corporate structure often used by firms with fewer

than 100 shareholders; such businesses can

elect to pay federal income taxes as partnerships

while retaining the liability limitations typical of

corporations.

limited- liability company (LLC) legal form of

organization allowing business owners to secure

the corporate advantage of limited liability while

avoiding the double taxation characteristic of

corporations.

domestic corporation firm that operates in the

state where it is incorporated.

foreign corporation firm that operates in states

where it is not incorporated.

alien corporation firm incorporated in one nation

and operating in another nation.

corporate charter legal document that formally

establishes a corporation.

preferred stock stock whose holders have prior-

ity over common stockholders in the payment of

dividends but usually have no voting rights.

common stock shares of ownership in a corpo-

ration.

employee ownership business in which workers

purchase shares of stock in the firm that employs

them.

not-for-profit corporation business-like organization such as a charitable group, social

welfare group, or religious congregation that

pursues objectives other than returning profit to

its owners.

vertical merger combination of two or more firms

operating at different levels in the production

and marketing process.

horizontal merger combination of two or more

firms in the same industry that wish to diversify,

increase their customer bases, cut costs, or offer

expanded product lines.

conglomerate merger combination of two or

more unrelated firms, usually with the goal of

diversification, spurring sales growth, or spend-

ing a cash surplus that might otherwise make the

firm a tempting target for a takeover attempt.

joint venture partnership between companies

formed for a specific undertaking.

public ownership organization owned and

operated by a unit or agency of government.

cooperative (co-op) organization whose owners

join forces to collectively operate all or part of the

functions in their business.

chapter 6

entrepreneur person who seeks a profitable

opportunity and takes the necessary risks to set

up and operate a business

classic entrepreneur person who identifies a

business opportunity and allocates available

resources to tap that market.

serial entrepreneur person who starts one busi-

ness, runs it, and then starts and runs additional

businesses in succession

social entrepreneur person who recognizes

societal problems and uses business principles

to develop innovative solutions.

lifestyle entrepreneur person who starts a bus-

ness to reduce work hours and create a more

relaxed lifestyle.

seed capital initial funding needed to launch a

new venture.

debt financing borrowed funds that entrepreneurs

must repay.

equity financing funds invested in new ventures

in exchange for part ownership.

venture capitalist business firms or groups of

individuals that invest in new and growing firms

in exchange for an ownership share.

angel investor wealthy individuals who invest

directly in a new venture in exchange for an

equity stake.

intrapreneurship process of promoting innovation

within the structure of an existing organization.

enterprise zones specific geographic areas

designated for economic revitalization.

skunkworks project initiated by a company

employee who conceives the idea, convinces top

management of its potential, and then recruits

human and other resources from within the firm

to turn it into a commercial project

pacing programs company-initiated and financed

program to develop new products

chapter 7

electronic business (e-business) conducting

business via the Internet.

corporate Web site Web site designed to

increase a firm’s visibility, promote its offerings,

and provide information to interested parties.

marketing Web site Web site whose main pur-

pose is to increase purchases by visitors.

business-to-business (B2B) e-business

electronic business transactions between organi-

zations using the Internet

extranet secure network used for e-business and

accessible through an organization’s Web site;

available to external customers, suppliers, and

other authorized users.

business-to-consumer (B2C) e-business

selling directly to consumers over the Internet

electronic storefront company Web site that sells

products to customers

phishing high-tech scam that uses authentic look-

ing e-mail or pop-up ads to get unsuspecting

victims to reveal personal information.

blog online journal written by a blogger.

search marketing paying search engines, such as

Google, a fee to make sure that the company’s

listing appears toward the top of the search

results.

click-through rate number of visitors who click on

a Web banner ad.

conversion rate percentage of visitors to a Web

site who actually make a purchase.

electronic data interchange (EDI) computer-

to—computer exchanges of invoices, purchase

orders, price quotations, and other information

between buyers and sellers.

private exchange secure Web site at which a

company and its suppliers share all types of

data related to e-business, from product design

through order delivery.

electronic exchange online marketplace that

caters to an industry’s specific needs.

e-procurement use of the Internet by business

and government agencies to solicit bids and

purchase goods and services from suppliers.

electronic shopping cart file that holds items

that the online shopper has chosen to buy

bot short for robot—a program that allows

online shoppers to compare prices for a specific

product at several e-tailers.

encryption process of encoding data for secu-

rity purposes, using software that encodes and

scrambles messages.

Secure Sockets Layer (SSL) technology that

secures a Web site by encrypting information

and providing authentication

electronic wallet secure computer data file set up

by an online shopper at an e-business site that

contains credit card and personal identification

information.

firewall electronic barrier between a company’s

internal network and the Internet that limits

access into and out of the network.

vishing variation on phising that involves

a voice system in which the intended victim

receives a voice message directing him or her to

reveal personal financial information.

channel conflict conflict between two or more

members of a supply chain, such as a manufac-

turer, wholesaler, or retailer.

spam popular name for junk e-mail.

electronic bulletin board Internet chat room that

allows users to post and read messages on a

specific topic
newsgroup noncommercial online forum

wiki Web page that can be edited by users.

podcast audio or video blog.

banner ad ad placed by an organization on

another organization’s Web site; interested

parties click on the ad for more information.

pop-up ad Internet ad that pops-up in a new

window; interested parties can click on the ad

for more information.

pre-roll video ad a short advertising video clip

that begins automatically whenever a users visits

a particular Web site

Web-to-store use of the Web to aid shoppers at

brick-and-mortar retailers.

display ad glossy-looking online ad often targeted

at a specific user

chapter 8

management process of achieving organizational objectives through people and other resources.

planning process of anticipating future events

and conditions and determining courses of

action for achieving organizational objectives.

vision perception of marketplace needs and the

methods an organization can use to satisfy them.

mission statement written explanation of an

organization’s business intentions and aims.

objectives guideposts by which managers define

the organization’s desired performance in such

areas as profitability, customer service, growth,

and employee satisfaction.

decision making process of recognizing a

problem or opportunity, evaluating alternative

solutions, selecting and implementing an alter-

native, and assessing the results.

leadership ability to direct or inspire people to

attain organizational goals.

corporate culture organization’s system of prin-

ciples, beliefs, and values.

organization structured grouping of people work-

ing together to achieve common goals.

departmentalization process of dividing work

activities into unites within the organization

delegation act of assigning work activities to

subordinates.

span of management number of subordinates a

manager can supervise effectively.

chain of command set of relationships that

indicates who directs which activities and who

reports to whom.
top management managers at the highest level

of the management pyramid who devote most

of their time to developing long-range plans for

their organizations.

middle management second tier in the

management pyramid that focuses on specific

operations within the organizations.

supervisory management first-line management;

includes positions such as supervisor, line man-

ager, and group leader; responsible for assigning

nonmanagerial employees to specific jobs and

evaluating their performance every day.

technical skills manager’s ability to understand

and use techniques, knowledge, and tools and

equipment of a specific discipline or department.

human skills interpersonal skills that enable a

manager to work effectively with and through

people; the ability to communicate with,

motivate, and lead employees to accomplish

assigned activities.

conceptual skills ability to see the organization

as a unified whole and to understand how each

part interacts with others.

organizing process of blending human and

material resources through a formal structure of

tasks and authority; arranging work, dividing

tasks among employees, and coordinating them

to ensure implementation of plans and accom-

plishment of objectives.

directing guiding and motivating employees to

accomplish organizational objectives.

controlling function of evaluating an organiza-

tion’s performance to determine whether it is

accomplishing its objectives.

strategic planning process of determining the

primary objectives of an organization and then

acting and allocating resources to achieve those

objectives.

tactical planning implementing the activities

specified by strategic plans.

operational planning detailed standards that

guide implementation of tactical plans.

contingency planning plans that allow a firm to

resume operations as quickly and as smoothly as

possible after a crisis while openly communicat-

ing with the public about what happened.

SWOT analysis method of assessing a company’s

internal strengths and weaknesses and its exter-

nal opportunities and threats.

competitive differentiation unique combination of

organizational abilities, products, and approaches

that sets a company apart from competitors in the

minds of customers.
programmed decision simple, common, and fre-

quently occurring problem for which a solution

has already been determined.

nonprogrammed decision complex and unique

problem or opportunity with important conse-

quences for the organization.

autocratic leadership management approach

whereby leaders make decisions on their own

without consulting employees.

democratic leadership management approach

whereby leaders delegate assignments, ask

employees for suggestions, and encourage their

participation

empowerment giving employees authority and

responsibility to make decisions about their work

without traditional managerial approval and

control.

free-rein leadership management style of leaders

who believe in minimal supervision and leave

most decisions to their subordinates

organizational chart visual representation of a

firm’s structure that illustrates job positions and

functions.

centralization decision making based at the top

of the management hierarchy.

decentralization decision makeup based at lower

levels of the organization

line organization organizational structure that

establishes a direct flow of authority from the

chief executive to subordinates.

line-and-staff organization structure that com-

bines the direct flow of authority of a line organi-

zation with staff departments that support the line

departments.

line manager executive involved with the func-

tions of production, financing, or marketing.

staff manager executive who provides informa-

tion, advice, or technical assistance to aid line

managers; does not have the authority to give

orders outside his or her own department or to

compel line managers to take action.

committee organization organizational structure

that places authority and responsibility jointly in

the hands of a group of individuals rather than a

single manager.

matrix structure project management structure that

links employees from different parts of the organi-

zation to work together on specific projects.