Margins Study Assistant

Chapter 1

Understanding Economic Systems and Business

Summary

A business is an organization that strives for a profit by providing goods and services desired by its customers. Businesses meet the needs of consumers by providing medical care, autos, and countless other goods and services. Goods are tangible items manufactured by businesses, such as laptops. Services are intangible offerings of businesses that can’t be held, touched, or stored.

Key terms

economic system: The combination of policies, laws, and choices made by a nation’s government to establish the systems that determine what goods and services are produced and how they are allocated
business: An organization that strives for a profit by providing goods and services desired by its customers
profit: The money left over after all costs are paid
services: Intangible offerings of businesses that can’t be held, touched, or stored
goods: Tangible items manufactured by businesses
mixed economies: Economies that combine several economic systems; for example, an economy where the government owns certain industries but others are owned by the private sector
pure monopoly: A market structure in which a single firm accounts for all industry sales of a particular good or service and in which there are barriers to entry

Chapter 2

Making Ethical Decisions and Managing a Socially Responsible Business

Read chapter 2 in the book

Summary

The first step in understanding business ethics is learning to recognize an ethical issue . Ethics is a set of moral standards for judging whether something is right or wrong. An ethical issue is a situation where someone must choose between a set of actions that may be ethical or unethical. For example, Martin Shkreli , former CEO of Turing Pharmaceuticals , raised the price of a critical, life-saving drug by 4000 percent, defending the price increase as a “great business decision.” This act resulted in…

Key terms

ethics: A set of moral standards for judging whether something is right or wrong
ethical issue: A situation where a person must choose from a set of actions that may be ethical or unethical
deontology: A philosophy in which a person will follow his or her obligations to an individual or society because upholding one's duty is what is ethically correct
justice: What is considered fair according to the prevailing standards of society; an equitable distribution of the burdens and rewards that society has to offer
utilitarianism: A philosophy that focuses on the consequences of an action to determine whether it is right or wrong; holds that an action that affects the majority adversely is morally wrong
code of ethics: A set of guidelines prepared by a firm to provide its employees with the knowledge of what the firm expects in terms of their responsibilities and behavior toward fellow…
corporate philanthropy: The practice of charitable giving by corporations; includes contributing cash, donating equipment and products, and supporting the volunteer efforts of company employees
corporate social responsibility (CSR): The concern of businesses for the welfare of society as a whole; consists of obligations beyond those required by law or contracts

Chapter 3

Competing in the Global Marketplace

Read chapter 3 in the book

Summary

Managers must develop a global vision if they are to recognize and react to international business opportunities, as well as remain competitive at home. Having a global vision has become an imperative for some businesses, especially large corporations, manufacturers, and retailers. A global vision can also be an important consideration for smaller firms as they work to manage costs, optimize efficiencies, and grow their market reach. Having a global vision means recognizing and reacting to international business opportunities, being aware of threats from foreign competitors in all markets, and effectively using international distribution networks…

Key terms

global vision: The ability to recognize and react to international business opportunities, be aware of threats from foreign competition, and effectively use international distribution networks…
absolute advantage: The situation when a country can produce and sell a product at a lower cost than any other country or when it is the only country that can provide the product
countertrade: A form of international trade in which part or all of the payment for goods or services is in the form of other goods and services
multinational corporations: Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located
protective tariffs: Tariffs that are imposed in order to make imports less attractive to buyers than domestic products are
imports: Goods and services that are bought from other countries
preferential tariff: A tariff that is lower for some nations than for others

Chapter 4

Forms of Business Ownership

Read chapter 4 in the book

Summary

Shepherd chose the sole proprietorship form of business organization—a business that is established, owned, operated, and often financed by one person—because it was the easiest to set up. Jeremy Shepherd was working full-time for an airline when, at the age of 22, he wandered into an exotic pearl market in China, searching for a gift for his girlfriend. The strand of pearls he handpicked by instinct was later valued by a jeweler back in the States at 20 times what he paid for it. Jeremy cashed his next paycheck and hurried back to Asia, buying every pearl he could afford.

Key terms

sole proprietorship: A business that is established, owned, operated, and often financed by one person
cooperative: A legal entity typically formed by people with similar interests, such as suppliers or customers, to reduce costs and gain economic power. A cooperative has limited liability, an…
corporation: A legal entity with an existence and life separate from its owners, who are not personally liable for the entity’s debts. A corporation is chartered by the state in which it is…
franchise agreement: A contract setting out the terms of a franchising arrangement, including the rules for running the franchise, the services provided by the franchisor, and the financial terms…
limited partners: Partners whose liability for the firm’s business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the firm’s…
limited partnership: A partnership with one or more general partners , who have unlimited liability, and one or more limited partners , whose liability is limited to the amount of their investment in…
S corporation: A hybrid entity that is organized like a corporation, with stockholders, directors, and officers, but taxed like a partnership, with income and losses flowing through to the…

Chapter 5

Entrepreneurship: Starting and Managing Your Own Business

Read chapter 5 in the book

Summary

There are over 36 million small businesses in the United States Brothers Fernando and Santiago Aguerre exhibited entrepreneurial tendencies at an early age. At 8 and 9 years old respectively, they sold strawberries and radishes from a vacant lot near their parents’ home in Plata del Mar on the Atlantic coast of Argentina. At 11 and 12, they provided a surfboard repair service from their garage.

Key terms

entrepreneurs: People with vision, drive, and creativity who are willing to take the risk of starting and managing a business to make a profit, or greatly changing the scope and direction of an…
small business: A business with under 500 employees that is independently managed, is owned by an individual or a small group of investors, is based locally, and is not a dominant company in its…
Small Business Investment Company (SBIC): Privately owned and managed investment companies that are licensed by the Small Business Administration and provide long-term financing for small businesses
angel investors: Individual investors or groups of experienced investors who provide financing for start-up businesses by investing their own funds
business plan: A formal written statement that describes in detail the idea for a new business and how it will be carried out; includes a general description of the company, the qualifications…
intrapreneurs: Entrepreneurs who apply their creativity, vision, and risk-taking within a large corporation, rather than starting a company of their own
Small Business Administration (SBA): A government agency that advocates for small business; specifically it helps people start and manage small businesses, advises them in the areas of finance and management, and…
venture capital: Financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies and receive an ownership interest and a voice in…

Chapter 6

Management and Leadership in Today's Organizations

Read chapter 6 in the book

Summary

This process is based in four key functional areas of the organization: planning, organizing, leading, and controlling. Management is the process of guiding the development, maintenance, and allocation of resources to attain organizational goals. Managers are the people in the organization responsible for developing and carrying out this management process. Management is dynamic by nature and evolves to meet needs and constraints in the organization’s internal and external environments.

Key terms

management: The process of guiding the development, maintenance, and allocation of resources to attain organizational goals
leadership: The process of guiding and motivating others toward the achievement of organizational goals
controlling: The process of assessing the organization’s progress toward accomplishing its goals; includes monitoring the implementation of a plan and correcting deviations from the plan
planning: The process of deciding what needs to be done to achieve organizational objectives; identifying when and how it will be done; and determining who should do it
organizing: The process of coordinating and allocating a firm’s resources in order to carry out its plans
conceptual skills: A manager’s ability to view the organization as a whole, understand how the various parts are interdependent, and assess how the organization relates to its external environment
operational planning: The process of creating specific standards, methods, policies, and procedures that are used in specific functional areas of the organization; helps guide and control the…
referent power: Power that is derived from an individual’s personal charisma and the respect and/or admiration the individual inspires

Chapter 7

Designing Organizational Structures

Read chapter 7 in the book

Summary

Determining work activities and dividing up tasks (division of labor) Grouping jobs and employees (departmentalization) Assigning authority and responsibilities (delegation) The result of the organizing process is a formal structure within an organization.

Key terms

authority: Legitimate power, granted by the organization and acknowledged by employees, that allows an individual to request action and expect compliance
departmentalization: The process of grouping jobs together so that similar or associated tasks and activities can be coordinated
division of labor: The process of dividing work into separate jobs and assigning tasks to workers
result of the organizing process: a formal structure within an organization
centralization: The degree to which formal authority is concentrated in one area or level of an organization. Top management makes most of the decisions
line positions: All positions in the organization directly concerned with producing goods and services and that are directly connected from top to bottom
mechanistic organization: An organizational structure that is characterized by a relatively high degree of job specialization, rigid departmentalization, many layers of management, narrow spans of…
organic organization: An organizational structure that is characterized by a relatively low degree of job specialization, loose departmentalization, few levels of management, wide spans of control…

Chapter 8

Managing Human Resources and Labor Relations

Read chapter 8 in the book

Summary

The process is sequential because employees can’t be trained and paid until selected and placed in jobs, which follows recruitment, which is preceded by human resource planning and job analysis and design. Human resource (HR) management is the process of hiring, developing, motivating, and evaluating employees to achieve organizational goals. HR practices and systems comprise the firm’s human resource decision support system that is intended to make employees a key element for gaining competitive advantage. To this end, the HR management process contains the following sequenced activities

Key terms

competitive advantage: A set of unique features of an organization that are perceived by customers and potential customers as significant and superior to the competition
process: sequential because employees can’t be trained and paid until selected and placed in jobs, which follows recruitment, which is preceded by human resource planning and job
human resource (HR) management: The process of hiring, developing, motivating, and evaluating employees to achieve organizational goals
recruitment: The attempt to find and attract qualified applicants in the external labor market
human resource planning: Creating a strategy for meeting current and future human resource needs
job analysis: A study of the tasks required to do a particular job well
job fair: An event, typically one or two days, held at a convention center to bring together job seekers and firms that are searching for employees
arbitration: Settling labor-management disputes through a third party. The decision is final and binding

Chapter 9

Motivating Employees

Read chapter 9 in the book

Summary

As such, motivation is essentially a need- and want-satisfying process. That is, motivation is what pushes us to move from where we are to where we want to be, because expending that effort will result in some kind of reward Unsatisfied needs and wants create a state of tension that pushes (motivates) individuals to practice behavior that will result in the need being met or the want being fulfilled. Motivation is the set of forces that prompt a person to release energy in a certain direction.

Key terms

need: The gap between what is and what is required
want: The gap between what is and what is desired
motivation: Something that prompts a person to release his or her energy in a certain direction
reward: Anything that increases a specific behavior
equity theory: A theory of motivation that holds that worker satisfaction is influenced by employees’ perceptions about how fairly they are treated compared with their coworkers
goal-setting theory: A theory of motivation based on the premise that an individual’s intention to work toward a goal is a primary source of motivation
Hawthorne effect: The phenomenon that employees perform better when they feel singled out for attention or feel that management is concerned about their welfare
Maslow’s hierarchy of needs: A theory of motivation developed by Abraham Maslow; holds that humans have five levels of needs and act to satisfy their unmet needs. At the base of the hierarchy are fundamental…

Chapter 10

Achieving World-Class Operations Management

Read chapter 10 in the book

Summary

The goal of customer satisfaction is an important part of effective production and operations. Industries, such as automotive, steel, and electronics, lost customers to foreign competitors because their production systems could not provide the quality at the price point that customers demanded. Production , the creation of products and services, is an essential function in every firm. Production turns inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are products and services.

Key terms

operations management: Management of the production process
production: The creation of products and services by turning inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are products and services
quality: Goods and services that meet customer expectations by providing reliable performance
goal of customer satisfaction: an important part of effective production and operations
blockchain technology: Refers to a decentralized “public ledger” of all transactions that have ever been executed. It is constantly expanding, as “completed” blocks are added to the ledger with each…
critical path method (CPM): A scheduling tool that enables a manager to determine the critical path of activities for a project—the activities that will cause the entire project to fall behind schedule if…
mass customization: A manufacturing process in which goods are mass-produced up to a point and then custom-tailored to the needs or desires of individual customers
materials requirement planning (MRP): A computerized system of controlling the flow of resources and inventory. A compehensive schedule is used to ensure that the materials, labor, and equipment needed for production…

Chapter 11

Creating Products and Pricing Strategies to Meet Customers' Needs

Read chapter 11 in the book

Summary

Marketing is the process of getting the right goods or services or ideas to the right people at the right place, time, and price, using the right promotion techniques and utilizing the appropriate people to provide the… This concept is referred to as the “right” principle and is the basis of all marketing strategy. We can say that marketing is finding out the needs and wants of potential buyers (whether organizations or consumers) and then providing goods and services that meet or exceed the expectations of those buyers.

Key terms

product: In marketing, a good, service or idea, along with its perceived attributes and benefits, that creates value for the customer
marketing: The process of discovering the needs and wants of potential buyers and customers and then providing goods and services that meet or exceed their expectations
exchange: The process in which two parties give something of value to each other to satisfy their respective needs
capital products: Large, expensive items with a long life span that are purchased by businesses for use in making other products or providing a service
competitive advantage: A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition; also called differential…
expense items: Items (purchased by businesses) that are smaller and less expensive than capital products and usually have a life span of less than one year
shopping products: Items that are bought after considerable planning, including brand-to-brand and store-to-store comparisons of price, suitability, and style
survey research: A marketing research method in which data are gathered from respondents, either in person, by telephone, by mail, at a mall, or through the internet to obtain facts, opinions…

Chapter 12

Distributing and Promoting Products and Services

Read chapter 12 in the book

Summary

Distribution is efficiently managing the acquisition of raw materials by the factory and the movement of products from the producer or manufacturer to business-to-business (B2B) users and consumers. Logistics activities are usually the responsibility of the marketing department and are part of the large series of activities included in the supply chain. A supply chain is the system through which an organization acquires raw material, produces products, and delivers the products and services to its customers. Exhibit 12.2 illustrates a typical supply chain.

Key terms

supply chain: the system through which an organization acquires raw material, produces products, and delivers the products and services to its customers
distribution channel: The series of marketing entities through which goods and services pass on their way from producers to end users
manufacturer: A producer; an organization that converts raw materials to finished products
advertising media: The channels through which advertising is carried to prospective customers; includes print media, broadcast media, outdoor advertising, and online advertising including social…
cost per thousand (CPM): Cost per thousand contacts is a term used in expressing advertising costs; refers to the cost of reaching 1,000 members of the target market
integrated marketing communications (IMC): The careful coordination of all promotional activities—media advertising, sales promotion, personal selling, and public relations, as well as direct marketing, packaging, and…
reach: The number of different target consumers who are exposed to a commercial at least once during a specific period, usually four weeks
publicity: Information about a company or product that appears in the news media and is not directly paid for by the company

Chapter 13

Using Technology to Manage Information

Read chapter 13 in the book

Summary

Information technology (IT) includes the equipment and techniques used to manage and process information. Information is at the heart of all organizations. Without information about the processes of and participants in an organization—including orders, products, inventory, scheduling, shipping, customers, suppliers, and employees—a business cannot operate Over several decades, we have shifted from an industrial society to a knowledge-based economy driven by information.

Key terms

information technology (IT): The equipment and techniques used to manage and process information
executive information system (EIS): A management support system that is customized for an individual executive; provides specific information for strategic decisions
data mart: Special subset of a data warehouse that deals with a single area of data and is organized for quick analysis
batch processing: A method of updating a database in which data are collected over some time period and processed together
online (real-time) processing: A method of updating a database in which data are processed as they become available
application service providers (ASP): A service company that buys and maintains software on its servers and distributes it through high-speed networks to subscribers for a set period and price
data mining: Sophisticated database applications that look for hidden patterns in a group of data to help track and predict future behavior
data warehouse: An information technology that combines many databases across a whole company into one central database that supports management decision-making

Chapter 14

Using Financial Information and Accounting

Read chapter 14 in the book

Summary

Prior to 2001, accounting topics rarely made the news. That changed when Enron Corporation's manipulation of accounting rules to improve its financial statements hit the front pages of newspapers. Top executives at these and other companies were accused of knowingly flouting accepted accounting standards to inflate current profits and increase their compensation. The company filed bankruptcy in 2001, and its former top executives were charged with multiple counts of conspiracy and fraud.

Key terms

accounting: The process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities
financial accounting: Accounting that focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and government agencies to assess the financial…
inventory turnover ratio: The ratio of cost of goods sold to average inventory; measures the speed with which inventory moves through a firm and is turned into sales
net loss: The amount obtained by subtracting all of a firm’s expenses from its revenues, when the expenses are more than the revenues
net profit (net income): The amount obtained by subtracting all of a firm’s expenses from its revenues, when the revenues are more than the expenses
double-entry bookkeeping: A method of accounting in which each transaction is recorded as two entries so that two accounts or records are changed
profitability ratios: Ratios that measure how well a firm is using its resources to generate profit and how efficiently it is being managed
Financial Accounting Standards Board (FASB): The private organization that is responsible for establishing financial accounting standards in the United States

Chapter 15

Understanding Money and Financial Institutions

Read chapter 15 in the book

Summary

What is money, what are its characteristics and functions, and what are the three parts of the U.S. Money is anything that is acceptable as payment for goods and services. Businesses and government use money in similar ways. Both require money to finance their operations.

Key terms

money: Anything that is acceptable as payment for goods and services
M2: A term used by economists to describe the U.S. monetary supply. Includes all M1 monies plus time deposits and other money that is not immediately accessible
reserve requirement: Requires banks that are members of the Federal Reserve System to hold some of their deposits in cash in their vaults or in an account at a district bank
bank charter: An operating license issued to a bank by the federal government or a state government; required for a commercial bank to do business
commercial banks: Profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services
Federal Deposit Insurance Corporation (FDIC): An independent, quasi-public corporation backed by the full faith and credit of the U.S. government that insures deposits in commercial banks and thrift institutions for up to a…
pension funds: Large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members
financial intermediation: The process in which financial institutions act as intermediaries between the suppliers and demanders of funds

Chapter 16

Understanding Financial Management and Securities Markets

Read chapter 16 in the book

Summary

It may not be as visible as marketing or production, but management of a firm’s finances is just as much a key to the firm’s success Financial management —the art and science of managing a firm’s money so that it can meet its goals—is not just the responsibility of the finance department. Any company, whether it’s a small-town bakery or Whole Foods Market, needs money to operate. To make money, it must first spend money—on inventory and supplies, equipment and facilities, and employee wages and salaries.

Key terms

securities: Investment certificates issued by corporations or governments that represent either equity or debt
financial management: The art and science of managing a firm’s money so that it can meet its goals
firm’s finances: just as much a key to the firm’s success
capital expenditures: Investments in long-lived assets, such as land, buildings, machinery, equipment, and information services, that are expected to provide benefits over a period longer than one year
dealer markets: Securities markets where buy and sell orders are executed through dealers, or “market makers,” linked by telecommunications networks
preferred stock: An equity security for which the dividend amount is set at the time the stock is issued and the dividend must be paid before the company can pay dividends to common stockholders
secondary market: The securities market where old (already issued) securities are bought and sold, or traded, among investors; includes broker markets, dealer markets, the over-the-counter market…

Chapter 17

Your Career in Business

Read chapter 17 in the book

Summary

Choosing a career path is an important decision. You might want to pursue a career as a physician, small business owner, financial analyst, information technology professional, or any of a thousand other opportunities. One thing that many careers have in common is that you need to have a basic understanding of business. Regardless of the career field you choose, having solid business skills will be of benefit.