Business Environment Mid Exam Review

8/8/2019 Business Environment Mid Exam Review

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Business EnvironmentBusiness Environment

Mid-term Exam Review


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MidMid--Term Exam FormatTerm Exam Format 15 multiple choice (30%)

1

0 True/False (1

0%) 8 short answer (40%)

10 definitions (20%)


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Pool of DefinitionsPool of Definitions Inputs

Outputs

PESTLE Factors Open System

Bureaucracy

Systems approach tomanagement

Downsizing

Checks and balances

Lobbies

Political Accountability

Recession

GDP

Inflation

Balance of Payments

Minimum wage

Derived demand

Judicial Precedent

Consideration

Joint Venture

Franchising


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Ch.1ConceptsCh.1Concepts Transformation system

The firm in its environment (General vs.

Contextual Environment)


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Transformation Systems (P.4)Transformation Systems (P.4) Transformation system the concept that

business activity transforms inputs into

outputs


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Firm EnvironmentFirm Environment Immediate or operational environment

suppliers, competitors, labor markets,

financial institutions, customers

General or contextual environment

economic, political, socio-cultural,technological and legal factors (PESTLEfactors)


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Open system & EnvironmentalOpen system & Environmental

UniquenessUniqueness Business organizations interact with the

environment

Changes in the environment cause changesin the inputs, in the transformation system,and the outputs

To a degree, each organization has a uniqueenvironment that will affect it in a uniqueway


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Ch. 2 ConceptsCh. 2 Concepts Organizational structures

Management Theories (Theories X & Y,

Scientific management, etc.)


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Types ofOrganizationalTypes ofOrganizational

StructuresStructures Functional

Divisional

Product-based

Matrix


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Management TheoriesManagement Theories Theory X workers are inherently lazy

Theory Y workers are committed to the firms

objectives and often actively seek responsibility Theory Z organizational efficiency and

effectiveness will increase if workers are givenlong-term employment, a share in decision-

making, opportunities for training, developmentand promotion, etc.

Scientific management theory (Weber) Bureaucracy organizations (P.19)


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Ch.3ConceptsCh.3Concepts Institutions of the European Union

The features of government in democratic

states (electoral system, party system,

representative assembly, pressure groups)

Three branches or functions of government


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European Union Institutions (P.European Union Institutions (P.

71)71) European Parliament

Council of Ministers

European Council

European Commission

European Court of Justice


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Features of Government inFeatures of Government in

Democratic States (P.46)Democratic States (P.46) Electoral system

Party system

Representative Assembly

System for articulating sectional interests

(Pressure groups)


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Three branches ofThree branches of

government (P. 53)government (P. 53) Legislative function

Executive function

Judicial function


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Ch.4ConceptsCh.4Concepts Free market economy

Circular flow of income and changes in

economic activity Government objectives in managing the

economy

Government policies to influence theeconomy

Direct foreign investment


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Free market economy (P.84)Free market economy (P.84) Resources owned by individuals

Firms make decisions free from government

interference

No master plan to direct production or

consumption

Decisions on resource allocation are the result of adecentralized system of markets and prices

Consumer dictates the pattern of supply


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Circular Flow of Income (P. 91)Circular Flow of Income (P. 91) P. 93 description of real flows and income

flows

Changes in economic activity (P. 94)

Leakages Savings, Taxation, Imports

Injections Government spending,

investment spending, exports

Multiplier effect


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Government Objectives in theGovernment Objectives in the

EconomyEconomy Controlling Inflation (see wages/prices

inflationary spiral) (P. 98)

Economic growth

Reducing unemployment

Favorable balance of payments

Controlled public borrowing

Stable exchange rate


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Government Policies in theGovernment Policies in the

Economy (P.104)Economy (P.104) Fiscal Policy

Monetary Policy

Direct controls (Tariffs)


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Direct Foreign InvestmentDirect Foreign Investment See Toyota UK case (P.116)


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Ch.5 ConceptsCh.5 Concepts The effects of an ageing population

The effect of minimum wage

Technology and investment


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The effects of an ageingThe effects of an ageing

populationpopulation See case (P.150)


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Minimum Wage (P.129)Minimum Wage (P.129) A wage floor set by law (See mini-case

P.131)


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Technology and InvestmentTechnology and Investment Capital (fixed capital and working capital)

Fixed capital buildings, plant and

machinery

Working capital raw materials and

components used in the production process


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Ch.6ConceptsCh.6Concepts Elements of a valid contract (offer,

acceptance, consideration, intention to

create a legal relationship)

Sources of law (custom, judicial precedent,

legislation)


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Elements of a valid contractElements of a valid contract

(P.166)(P.166) Offer

Acceptance

Consideration

Intention to create a legal relationship

Capacity


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Sources of Law (P.160)Sources of Law (P.160) Custom

Judicial precedent

Legislation


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Ch.7 ConceptsCh.7 Concepts Types and nature of business organizations

Franchising, licensing and joint ventures


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Types of Legal StructuresTypes of Legal Structures

(P.186)(P.186) Sole Trader

Partnership

Limited Company


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Franchising, Licensing, JointFranchising, Licensing, Joint

VenturesVentures Franchise one party (franchisor) sells the right to

another party (franchisee) to market its product or

service License Licensor authorizes licensee to use

intellectual property (copyright, trademark, patent,

know-how, etc.)

Joint venture jointly owned and independent

business involving more than one organization


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Ch.8ConceptsCh.8Concepts Methods of growth (P. 222)

Finance for growth (P. 225)


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Methods of GrowthMethods of Growth Internal Growth

External Growth

1) takeover

2) merger

a) horizontal mergerb) Vertical mergers (vertical integration)


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Finance for GrowthFinance for Growth Internal sources reinvestment of profits (some

money will leave the company in the form of

dividends to shareholders) External sources

1) Banks

2) Capital markets (primary and secondary

markets) (preference shares, ordinary shares,debentures)

3) Money markets


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TopicsTopicsInternal/

External

Political

Environment

Economic

Environment

People. Tech/

Legal Env.

Legal

Structures

Size Structure

$100 $100 $100 $100 $100 $100

$200 $200 $200 $200 $200 $200

$300 $300 $300 $300 $300 $300

$400 $400 $400 $400 $400 $400

$500 $500 $500 $500 $500 $500

$600 $600 $600 $600 $600 $600


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Internal/ExternalInternal/External

$100$100 The concept that firms use inputs and

change them into outputs

Transformation system


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$200$200 Suppliers, competitors, labor markets,

financial institutions and customers are

called a firms __________

Immediate or operational environment


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$300$300 Analysis of the firms current and future

environment using political, economic,

socio-cultural, technological, legal andethical influences

PESTLE analysis


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$400$400 An arrangement for combining functional

specialization with a structure built around

products, projects or programmes

Matrix structure


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$500$500________________ is the theory that

workers are inherently lazy, and

_____________ is the theory that workersare committed to firm objectives

Theory X, Theory Y


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$600$600 A concept of organizational structures

should are hierarchical, with definite

authority, rules and procedures, specifiedroles, appointment based on merit, and job

specialization

Bureaucracy


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Political EnvironmentPolitical Environment

$100$100 The bureaucratic arm of the European

Union, charged with running the day-to-day

operations of the EU and implementing EUpolicies

European Commission


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$200$200 A system of voting where approval of a

major EU decision must be by a majority of

members of the Council of Ministers, andby a majority of votes

Qualified Majority Voting


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$300$300 The legislative branch of the EU, with the

power to reject the budget, supervise the

European Commission, and approve somelegislation before approved by the Councilof Ministers

European Parliament


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$400$400 The idea that three arms of government are

controlled by different people, and that

decisions require the agreement of all three

Separation of power


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$500$500 A system of government where the power to

make decisions is divided between two

levels of government (ie., national andregional/local)

Federal system


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$600$600 A group that influences political

environment not be seeking political office,

but by attempting to influence thegovernment to favor its needs and wants

Pressure groups


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MacroeconomyMacroeconomy

$100$100 A type of economy characterized by

resources owned by individuals, no master

plan of production and consumption, andresource allocation based on decentralizedmarkets an prices

Free market


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MacroeconomyMacroeconomy$200$200

Savings, Taxation and imports are called

________________ in the circular flow of

income

Leakages


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$300$300 An upward and persistent movement in the

general level of prices over time, and a fall

in the value of money

Inflation


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$400$400 A concept that when prices rise, employees

will seek higher wages, and that firms, after

giving higher wages, will pass the cost on toconsumers in the form of price increases

Wages/Prices inflationary spiral


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$500$500 The net balance of credits and debits arising

from international trade over a given period

of time

Balance of payments


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$600$600 An increase in ______________ will cause

a countrys exports to be more expensive

for foreign purchasers

Exchange rate


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People, Tech/Legal Env.People, Tech/Legal Env.

$100$100 A floor for wages prescribed by law

Minimum wage


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People, Tech/LegalPeople, Tech/LegalEnvironmentEnvironment

$200$200 Buildings, plant and machinery are referred

to as a companys ___________

Fixed capital


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$300$300 Another name for law that comes from

legislation is_________

Statute


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$400$400 The concept that previous decisions of a

higher court must be followed by a lowercourt

Judicial precedent


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$500$500 A declaration by the offeror that it intends

to be legally bound by stated terms

Offer


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$600$600 A right, interest, profit or benefit accruing

to one party or some forbearance, detriment,loss or responsibility given, suffered, or

undertaken by the other

Consideration


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Legal StructureLegal Structure

$100$100 A legal structure characterized by unlimited

liability and one owner

Sole Trader


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$200$200 A legal structure characterized by a

separation of ownership and management,

greater access to capital, and the issuance ofstock

Limited company


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$300$300 A recurring payment based on a percentage

of profits or sales

royalty


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$400$400 A business arrangement usually used by

manufacturing firms in which one party

gives the other party a right to use itsintellectual property

License


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$500$500 A jointly owned and independently

incorporated business venture involving

more than one organization

Joint Venture


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$600$600 A business arrangement where one party

sells another party the right to market its

product or service

Franchising


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Size StructureSize Structure

$100$100 The voluntary coming together of two

companies with the agreement of

management of the two companies

Merger


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$200$200 A combination of firms at different stages

of the same production process

Vertical merger/vertical integration


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$300$300 A share of stock that carries a fixed

dividend and no voting rights

Preference share


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$400$400 A market involving the buying and selling

of new shares of stock

Primary market


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$500$500 The main motivation for a merger involving

firms that produce different goods is

_____________

Diversification


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$600$600 Bonds given by a company in exchange for

a loan to the company

Debentures

Business Environment Mid Exam Review

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