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MGMT 320 Midterm part 1
Business Government and Society
49
Business
Undergraduate 3
04/24/2010

Additional Business Flashcards

 


 

Cards

Term
Society influences
Definition
mixture of economic, political, social, and cultural influences
Term
Systems theory
Definition
all living organisms (systems) interact with, and are affected by, other forces in their host environment
Term
adapt
Definition
to be responsive to the changing conditions of an environment
Term
3 main themes of the course
Definition
1. Ethics and CSR
2. How much government regulation of business is necessary
3. The relationship between businesses and: other businesses, managers and owners, employees, consumers, the environment
Term
people in business
Definition
people usually want to engage in good behavior but also tend to act in their own self-interest. Tod thinks about 5% engage in ethically suspect behavior
Term
Tod's hierarchy of "bad" things
Definition
1. Violate laws
2. Expose business to lawsuits, loses
3. Expose business to costly litigation, wins
4. Violations of industry ethics norms resulting in sanctions or disbarred

All lead to bad PR
Term
Elie Wiesel and Bernie Madoff
Definition
Wiesel wrote "Night." Madoff stole money from all his clients and lost them more than 50 bil.
Term
The Role of Government
Definition
(1) Establish Justice; (2) insure domestic Tranquility; (3) provide for the common defense; (4) promote the general welfare.
Term
Regulations
Definition
legal rules that apply to businesses
Term
Americans and regulations
Definition
Americans want less government and fewer regulations since it allows individuals and businesses more freedom
Term
Costs of complying with regulations
Definition
result in: (1) lower profits for owners; (2) higher costs for consumers; and/or (3) less competitive goods & services in a global marketplace (with different regulatory schemes in different markets).
Term
externalities
Definition
an expense or cost, incurred in production, distribution or use of a product or service, which is not born by the business or consumer, but by the general public.
Term
Pro-Regulation reasons
Definition
1. Whats good for a business is not always best for society/govnt
2. Businesses may not adequately address issues of public safety
3. Regulations used to deter businesses from engaging in unethical conduct, make examples..
Term
"violent video games"
Definition
federal judge (Robert Lasnik) in Seattle blocked enforcement of a state law that banned the sale of certain violent video games to minors. He questioned the law's constitutionality
Term
Quotes on Economic crisis of 2009
Definition
Obama in inauguration address- “[o]ur economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices…” “this crisis has reminded us that without a watchful eye, the market can spin out of control”

Thomas Friedman- “this financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics. So many people were in on it:"
Term
The Three Major Economic Systems
Definition
1. Socialism
2. Communism
3. Capitalism
Term
Socialism
Definition
Individuals have exclusive rights to personal property they purchase, but limited rights to own companies and “public resources”, such as lands and other natural resources, which are considered to be owned by society.
Term
Tendencies of Socialism systems
Definition
income tax rates on individuals are high

public assistance to the poor is high
Term
Communism
Definition
-, individuals voluntarily chose to be subservient to the collective society, and were motivated by their desire to contribute to the public interest.

Marx: “From each according to his abilities, to each according to his needs.”

Consumerism yes, but no individual ownership of property

Only communist country today is Cuba
Term
Capitalism
Definition
Competition rewards the efficient producer, and thereby delivers to the consumer a product at the most efficient price. Individuals hold government-protected property rights, including those used in production, natural resources, and their own labor. Within the legal framework, individuals can use their skill and labor however they wish. Profit is the incentive.

Adam Smith "The Wealth of Nations"
Term
Capitalism exceptions
Definition
1. Obscene profits are targeted with higher taxes

2.Sometimes the government maintains a monopoly, or takes a business “public”, while at other times the government may sell off public property, or a public function
Term
Eminent domain
Definition
Government can take property from person but must give fair compensation
Term
Models of BGS
Definition
1. The Market Capitalism model
2. The Dominance Model
3. The Stakeholder Model
Term
The Market Capitalism model
Definition
Government interference should be minimal.

Laissez-faire.

Competition will keep profits to a minimum.

People should have freedom to pursue their own self-interest

Managers should define company interest narrowly: the bottom line.
Term
Laissez-faire
Definition
means Let do or Let it be.

the idea that markets should determine everything and be free from state interventions
Term
conclusions of the market capitalism model
Definition
- There should be limited government regulations
- Corporations are in business only to make profits
- Managers’ duty is only to make profits.
Term
The Dominance Model
Definition
Put forward by business critics.

A small elite within business and government dominate society, and
work to perpetuate wealth for the few. This is undemocratic.
This model does not view regulations as being capable of achieving results.

Model gained a following during the time period of large trusts.

Many parts of world fit this model even today: Asia (Japan) for
instance, has government in close cooperation with industry.
Term
conclusions of the dominance model
Definition
1. A business can keep prices high, if it can keep competitors out.
Anti-trust violations.

2. Can influence the law through lobbying and contributions (see Washington State Supreme Court races, 2006).

3. A business may influence how its employees behave, even off the job.
Smoking off the job?

4. Businesses may affect the environment.
Example: Externalities.
Term
The Stakeholder Model
Definition
Stakeholders are any entity that it benefitted, or burdened, by the actions of a business or corporation. Primary stakeholders are entities who are in a relationship with the firm in which they, the firm, or both are affected immediately, continuously, and powerfully. Suppliers, employees and the environment are all considered stakeholders in an average company.
Term
Modern view of stakeholder model
Definition
corporations exist within society and have a "social contract" with the society.
Reasons:
1.Companies only exist because the society and government have given them the right to exist, by creating the rules.

2.As companies have gained more power, society expects more of them.
Term
Primary Stakeholders
Definition
those who are critical to the company’s survival and success:
Investors (equity)
Creditors (debt)
Employees
Suppliers
Wholesale distributors and retailers
Customers
Term
Secondary Stakeholders
Definition
other groups that have an interest in the corporation.
Local communities (local, secondary businesses; home values)
Federal, State and Local Governments (tax base)
The Public (CSR – supporting local charities, etc.)
Social Activist groups (environmental groups)
Term
Forces of Change in the Business Environment
Definition
1. The Industrial Revolution
2. Dominant ideologies in America
3. Inequality in the Distribution of wealth
4. Science and Technology
5. Natural Resources/ Populations
6. Chance
7. Commerce and Communications
8. The evolving goals of business
Term
The Industrial Revolution
Definition
A. invention of new manufacturing techniques
B. breakup of small, agrarian farms, in favor of city w/ready labor forces;
C. combination of capital and labor
D. creation of new consumer markets
Term
Dominant Ideologies in America
Definition
1. Capitalism
2. Private Property
3. Constitutional Democracy
4. Independent Judiciary able to enforce contracts
5. Political philosophers (other card)
Term
Prominent American Political Philosophers
Definition
Adam Smith: Free markets create wealth; potential profit
motivates us; while the fear of loss makes us careful.

B.Darwin: The strong will survive via natural selection.

C.Herbert Spencer: Social Darwinism – The most resourceful people will survive. Charity perverts this process.
Term
Inequality in the Distribution of Wealth
Definition
One of the basic political conflicts in every nation is the result of economic antagonism between the rich and the poor. Is the unequal distribution of wealth a problem?
Term
Science and Technology
Definition
Scientific advances have fueled commerce and business. Business has utilized new discoveries to more efficiently convert basic resources into new products. The invention of the microchip has changed virtually every form of business.
Term
Natural Resources/ Populations
Definition
The finite nature of the earth’s resources w/cause problems: oil!

High populations with low incomes = ready labor supply = companies relocating where labor is less expensive = significant impact on domestic jobs.

Think: China + other developing nations.
Term
Chance
Definition
Chance and Luck can cause great shifts in wealth.
Think IBM story
Term
IBM Story (Chance)
Definition
In the mid-1970s, IBM was the largest computer manufacturer in the world, but it had one problem: the US government was suing it for being a monopoly (it had too much of the market).

called a "vertical monopoly"

In response, IBM was hesitant to own every aspect of its new PC.

The IBM chairman at the time was on the Board of Directions of United Way, which also happened to have a Seattleite on the board. The woman’s name was Mary…
Term
Commerce and Communications (Thomas Friedman)
Definition
Thomas Friedman wrote "The World is Flat"
Commerce 1.0 (The Nation State engaged in trade: Think England.) 1482-1800

Commerce 2.0 (The rise of the corporation.) 1800-2000

Commerce 3.0 (Communications empowers the individual) (Individuals and small groups globalizing) 2000-present
Term
The Evolving Goals of Business
Definition
1.Historic view: Profit for the owners. End of story.

2.Modern View continues to be profit for owners, but also considers stakeholders, e.g.

A.Employees
B.Local/national communities
C.Environment
D.Etc.
Term
How Government Exerts Power Over Business
Definition
1. The Economic Environment- Gov't sets min. wage. Federal Reserve Bank sets monetary policy. Executive and Legislative branches set tax policy
2. Government set rules regarding Employment
3. The politics of regulations- degree of gov't regulation is the product of politics, think Polar Bear endangered species and Global Warming.
4. Environmental Considerations- a. Federalism and environment issues: Federal-EPA, State- Growth Management Act, Local-Seattle Regulations
b. Enforcement of Regulations
5. Regulate how businesses relate to and interact with other businesses- This is Anti-Trust Law
Term
Relationship between culture and business
Definition
Business affects our cultural environment, just as cultures affect business.
Culture = System of values, beliefs, customs, attitudes manners and rituals.

Business must understand the cultural environment of the country that it is doing business in, as well as its home country:
Term
Examples of Business exerting power over Govt and Society
Definition
Ex. Businesses and their employees pay taxes, which keep government, and other businesses going. That’s real power…

Ex. In choosing where to locate a new factory, with the jobs it will provide, businesses often try to extract concessions from communities, and may play different communities against each other. Example: Boeing.

Ex. The law considers a corporation a “person”, so the corporation can hire lobbyists, and provide campaign contributions, within limits.
Term
Owner-stakeholders
Definition
1. primary interest is making a profit
2. have voting power to elect the Board of Directors. B of D selects officers who set policy and hire employees
Term
Stakeholder Power (owners, customers, govt)
Definition
Owner-stakeholders have voting power (to elect the Board of Directors, who in turn select the officers, who in turn set policy and hire employees).

Customers, suppliers, and retailers have economic power: they can withhold supplies, raise prices, or refuse to fill orders if contractual obligations are ignored, and consumers may choose to purchase goods from other sellers.

Government (the people) exercise political power, and through passing laws may regulate a business, or erect laws that make conducting business more burdensome, or less burdensome (think employee-employer laws).
Term
3 ways stakeholders can influence a corporation
Definition
1.formal- Government regulations; stockholder voting

2.economic- consumer boycotts, protests

3.political -(Microsoft’s customer then employees – Washington’s gay rights legislation.
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