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| Government is the formal institutions through which a land and its people are ruled. Mechanism by which people collectively organize to provide things indiviudals cannot provide to themselves |
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| economic system in which all or most of the means of production and distribution are privately owned and operated for profit. |
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| Name a pure capitalist country |
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| Capitalism is foundation for which economies |
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| England, Canada, Australia, and most developed nations |
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| market decides what to produce and in what quantities (not the government) |
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| 4 basic rights under free-market capitalism |
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Definition
Freedom of Choice-People can choose where they live, work, and what they do
Private Property-individuals buy sell, own property, and pass it on
Profit/Ownership-right to keep profits
Freedom of Competition-Right to compete within government guidelines |
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| no one producer can dictate price. Agriculture is a good example |
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| many sellers with perceived differences (ie fast food and colleges) |
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| few sellers (automobiles and tobacco) |
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| one seller-diamonds, utilities |
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1. inequality of wealth (causes tension)
2. Greed compromising ethics
3. Potential environmental damage
4. Limitation push country towards socialism=government regulation |
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| economic system based on premise that basic industries should be owned or controlled by the government to more evenly distribute resources |
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-public and private ownership
-some choices limited
-Creates social equality
reduces individual incentive (causes brain drain) |
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| economic and political system in which the government makes almost all economic decision and owns all factors or production (north korea and cuba) |
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| Biggest issue with communism |
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Definition
| government does not know what to produce because prices do not reflect supply and demand |
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Definition
| some allocation of resources is made by the market and some by the government |
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| 5 reasons why government is necessary |
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Definition
maintain order and enforce the law
protect national resources
protect private property
provide public goods and services
provide national defence |
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| creates the institutional structure in which political and economic activity occurs but plays a minimum role |
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| market structure is not sufficient in promoting economic well-being (neo-mercantalist) |
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| Mitigates undesirable consequence of market activity without losing the benefits of a competitive economy. Gov regulates product and production processes, issues rules governing collective bargaining, equal opportunity, and human resource policy |
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| distribution of wealth and income among people in a society |
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| Why is BGR field important to managers? |
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Definition
| to succeed, businesses must be responsive to both economic and noneconomic environment, which means upholding social contract with society |
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| business and government dominate the people which results in enrichment of few at expense of many (most prevalent in 1800s but returning due to fear of transnational corporations |
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| A society with multiple groups and institutions through which power is diffused. Assumes power is dispersed and political decisions are a results of the greater weight of one group |
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| complex forces at work and none are dominant. |
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| How does pluralist differ from market capitalism model? |
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Definition
| shows businesses as exposed to the influences of non-market forces |
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| Countervailing Forces BGR (4) |
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Definition
Business is deeply integrated in society
Business is a major initiator of change in government and society
Public support of business is dependent on businesses adapting to macro-environment
environment is constantly changing |
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Term
| Market Capitalism BGR Model |
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Definition
depicts business as operating within a market environmment, responding primarily to economic forces. Market is a buffer between business and nonmarket forces
(capitalism, managerial capitalism, Adam Smith all look at this) |
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| 6 Assumptions of Market Cap Model |
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Definition
government interference is slight
individuals can own private property and freely risk investments
consumers are informed and make rational decisions
moral restraint accompagnies the self-interested behavior of businesses
basic institutions such as banking and laws exist to ease commerce
there are many producers and consumers in competitive markets |
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| 2 critiques of market cap model |
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Definition
increased prosperity increases inequality
results in base values being energized and virtues are eroded |
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| BGR relationship according to Market Cap Model (4) |
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Definition
government regulation are limited
markets discipline private economic activity to promote social welfare
the proper measure for corporate performance is profit
Ethical duty of management is to promote the interests of shareholders |
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Term
| BGR also has Stakeholder model |
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Definition
| always consider welfare of stakeholder |
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| Criticism of stakeholder model 2 |
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Definition
-not realistic assessment of the power relationships between the corporation and its entities
-there is no single clear and objective measure to evaluate combined ethical and economic performance of a firm |
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| Support of Stakeholder model |
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Definition
corporation that embraces stakeholders performs better
-it is an ethical way to manage because stakeholders have moral rights that grow from the way powerful corporations affect them |
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| identified the institutions that provide economic leadership |
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| company-lead because private corporations organize the economy and gov interaction is limited |
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| state-led because structure of financial system is an instrument of gov intervention |
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| German economic leadership is.... |
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| negotiated. Major financial decisions resulting from specific deals between finance, labor, gov, and industry |
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| UK has a ____ appproach to managing economy |
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