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rsm100 TERMS PACKAGE 1.docx

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Department
Rotman Commerce
Course
RSM100Y1
Professor
Michael Khan
Semester
Fall

Description
TERMS PACKAGE THANKS TO ALL THOSE WHO CONTRIBUTED. THE DEFINITIONS WILL START FROM PAGE 2. Sadly, not all the term sets were chosen/sent in. We covered most of them though  TERMS SET 1 (NO ONE CONTRIBUTED ) Business: Profits: Not-for-profit organizations: Factors of production: Natural resources: Capital: Human resources: Entrepreneurship: TERMS SET 2 (BY: SHANTU TIWARI) Private Enterprise System: A type of economic system in which businesses need to recognize consumer demands, and fulfill them. Profitable firms in this system fulfill consumer demands the best. For example, businesses in Canada and the US function under this system. In this system, it is necessary to fulfill consumer demands to gain profit. This profit will result in access to more factors of production, which can be used to generate even bigger profits. Capitalism: Another name for private enterprise system (it is the same thing). Businesses need to realize what consumers demand, and produce that product. The businesses that serve consumers the best gain the largest profits. Competition: The struggle between businesses to gain consumers. Businesses are constantly battling for consumers to gain more profit. Businesses battle for consumers in a number of ways, and the most important being a quality product. As businesses compete for customers, they have to give out a better product than their competition, so that the consumer buys from them. Due to this, less efficient firms are driven out of the industry, whereas those firms that exceed consumers’ demands are successful. For example, Microsoft and Google are competitors in the web, consistently exceeding customer’s wants. Competitive Differentiation: The way a company is unique compared to its competition in the eyes of the consumers. It can be a combination of products sold, abilities of the company, or selling approaches. Competitive differentiation is needed in order for a firm to compete successfully. Private Property: The most basic freedom in a Capitalist society. Like the name suggests, it is essentially the right to own private property. It is the right to own, use, buy, and sell any property owned. The citizens in a capitalist society need to have certain rights, and private property is the most basic. An example would be a businessman that owns a building where his work is conducted. The building is a form of private property, and the businessman can use it, buy it, sell it, or do anything with it that he chooses. Entrepreneur: A person who sets up and runs a business, because there is an opportunity to generate profit. Entrepreneurs need to take numerous risks and overcome many obstacles to be successful. Entrepreneurs are important to society because they lead to economic growth, and keep pressure on existing companies to exceed consumer demands. Essentially, the private enterprise system wouldn’t even exist if people did not take risks and become entrepreneurs. Consumer Orientation: Products that are designed by a business, to focus on consumers’ unmet wants. In this philosophy, consumers are focused on first by the business, and their wants dictate which products are sold. As a result of this, consumers have an immense amount of choices in the market, because businesses are looking to satisfy them. For example, Samsung is always creating new phones, depending on what consumers want. TERMS SET 3 (BY: YANGFANG SONG) Brand: A term, logo, sign or in other forms that creates the identities of the products of a firm. It is made in order to make the products stand out. Example can be Apple Logo. Branding is the process of creating the uniqueness (such as services or goods) of the firm into customer’s mind. It is a major marketing tool in contemporary business. The Home Depot is an example since the community knows its brand for its excellent customer services, an entrepreneur spirit and its feedbacks. Transaction management: this approach was built during the Industrial Revolution where firms concentrate on promoting and producing goods and services in the hope that the revenue would cover the cost. More customers would generate more revenue. The firms do not consider the ties with the customers. Relationship Era: The firms began slowly to build ties with customers through every transaction in order to obtain long-term customers. The strategy of customer loyalty was being built and promoted. Less overall-cost, and knowledge of customer preferences are both an advantage for the firms through competitive differentiation. Relationship management: this approach is tied with Relationship Era which it represents maintaining the ongoing ties with customers and the firms. It requires the managers to gather the information on customers’ preferences and apply it to pull the relationship ties with the customers closer. Technology: Many firms use some new technologies such as Blogs in order to understand the current preferences and tastes of their customers. It also connects the customer directly with the firm. Strategic Alliances: businesses forms partnership in order to achieve a comparative advantage. For example, online business such as Amazon or Overstock.com may partner up with traditional retailers. Online shopping websites have the strength on promoting and easy accessibility, whereas the retailers have the knowledge on the proper quantity to purchase from the right merchandise. Both of them would create a comparative advantage from such partnership. TERMS SET 4 (BY: ADIL MANSOOR) Diversity: The blending of individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities to enhance a firm’s chances of success.  Significance: Studies show that diverse employee teams and workforces tend to perform tasks more effectively. They also develop better solutions to business problems than homogenous employee group. This is mainly because of the varied perspectives and experiences offered by a diverse group of employees, who in turn promote innovation and creativity in multicultural teams.  Example: Firms that made the top 10 in the list of “Top 50 Companies for Diversity” were also leaders and innovators in their industries, including Johnson & Johnson, AT&T, Ernst and Young, Coca-Cola, and IBM. Outsourcing: Outsourcing is the use of outside vendors to produce goods or fulfill services and functions that were previously handled in-house or in country.  Significance: Outsourcing can reduce costs and allow a firm to concentrate on what it does best, while accessing expertise it may not have. However outsourcing also creates its own challenges, such as differences in language or culture.  Example: Wal-Mart buys its products from international producers, which allows them to get lower costs and thus they can offer us lower costs while simultaneously getting a profit. Offshoring: The relocation of business processes to lower-cost locations overseas.  Significance: Offshoring can involve both production and services. This allows firms to get better in terms of labor. It also poses issues because such jobs could have been provided to workers in the firm’s own country.  Example: China has emerged as the prime location for production offshoring, while India has emerged as the prime location for service offshoring. This is why many products you find in Canadian stores are usually “Made in China.” This is also why whenever you get a Telemarketing call the caller has an Indian accent. Nearshoring: The outsourcing of production or services to locations near a firm’s home base.  Significance: Nearshoring allows for shipping costs and times to reduce drastically. It also allows for better communication, and easier management of the outsourced locations.  Example: Local food stores that tend to import their products from local farms. Vision: The ability to perceive marketplace needs and what an organization must do to satisfy them.  Significance: Vision is a strong part of becoming successful. Managers and businesspeople need to be able to understand current market needs and appropriately fulfill them. Otherwise they will not have growth in their business.  Example: James Cameron won several Oscar awards, as well as, became a huge part of Titanic and Avatar, the two movies that made the most profits. This is because he understood what the audience wanted at each time and produced the movies accordingly. Critical thinking: The ability to analyze and assess information to pinpoint problems or opportunities.  Significance: This should be drilled in everyone’s head. Critical thinking will always lead to success. The upper level positions like CEOs, and managers tend to gain their status because of their exceptional critical thinking skills. Creativity: The capacity to develop novel solutions to perceived organizational problems.  Significance: Creativity not only enhances and enriches the business world through increasing innovation. It also marks as a standpoint for whether a business can continue being successful or not. TERMS SET 5 (BY: KATIE MCLEOD) Economics: The social science that studies the choices people and governments make when dividing up their scarce resources. There are three different types of economic systems, they are capitalism, planned economies, and mixed market economies. (Economic system- the exchanges that companies and societies make as a whole). Microeconomics: A branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services. Macroeconomics: The sum total of economic activity, dealing with the issues of growth, inflation, and unemployment. Macroeconomics is the study of a nation’s overall economic issues, such as how an economy maintains and divides up resources and how a government’s policies affect its citizens’ standards of living. Demand: A consumer’s desire and willingness to pay a price for a specific good or service. Supply: The total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph. This relates closely to the demand for a good or service at a specific price; all else being equal, the supply provided by producers will rise if the price rises because all firms look to maximize profits. Demand curve: A graph depicting the relationship between the price of a certain commodity and the amount of it that the consumers are willing and able to purchase at that given price. Demand curves typically slope downward because lower and lower prices attract larger and larger purchases. Supply curve: Shows the relationship between different prices and the amount of goods that sellers will offer for sale at those prices, regardless of demand. (Movement along the supply curve is the opposite of movement along the demand curve: as price rises, the quantity that sellers are willing to supply also rises. At lower and lower prices, the quantity supplied decrease.) Equilibrium price: the current market price for an item. (It is the point on a graph where the supply curve and the demand curve meet). If the market price differs from the equilibrium price, buyers and sellers tend to make purchase choices that restore the equilibrium level. What would happen if the actual price were below the equilibrium price? The demand would be higher than the supply. If the price were above the equilibrium price there would be an excess supply. TERMS SET 6 (BY: JESSIE ZHANG)  VERY WELL DONE. THIS IS THE QUALITY WE SHOULD ALL STRIVE FOR IN THE FUTURE One Many Monopoly Oligopoly Monopolistic Pure Competition Competition Four Basic Types of Competition In Private Enterprise System 1. Pure Competition Textbook Definition: a market structure where large numbers of buyers and sellers exchange similar products, and no single participant has a large influence on price. -Prices are set by force of supply and demand. -Firms can easily enter or leave the market Example: small-scale agriculture. Wheat harvest by one farmer is about the same as the wheat harvest by other farmers across Manitoba. The law of supply and demand determines its price. 2. Monopolistic Competition Textbook Definition: a market structure where large numbers of buyers and sellers exchange distinct and differentiated (dissimilar) products so each participant has some control over price. -Somewhat difficult for new firm to enter the market. -A success product often attracts new competitors. Example: Prices of pet foods varies from brand to brand. Consumer can choose the brand with the lowest prices, or sellers can convince consumers a more expensive brand is worth more because it offers better nutrition. 3. Oligopoly Textbook Definition: a market situation where relatively few sellers compete and high start-up costs act as barriers to keep out new competitors. -Difficult for new competitors to enter the market -Products can be similar (paper or steel) or different (aircraft models) -Limit numbers of sellers increase control over price Example: telecommunications companies like Bell and Rogers. 4. Monopoly Textbook Definition: a market situation where a single seller controls trade in a good or service, and buyers can find no close substitutes. -No direct competition -Government regulates market -In a pure monopoly, individual firms have control over price. In a regulated monopoly, government controls the price. Example: Rawlings Sporting Goods, exclusive supplier of major-league baseballs. Regulated Monopoly Textbook Definition: a firm that is granted exclusive rights in a specific market by a local, provincial, or federal government. Example: Canadian Radio-television and Telecommunications Commission (CRTC) require no less than 8% of French-language films are Canadian. Ontario Energy Board sets electricity and natural gats rates. Two Forms of Planned Economies Planned Economy Textbook Definition: an economic system where business ownership, profits, and resource allocation are shaped by a plan to meet government goals, not goals set by individual firms. 1. Socialism Textbook Definition: an economic system where the government owns and operates the major industries, such as energy and communications. -Private ownership in less important industries such as restaurants. -Major industries are too important to be left in private hands. 2. Communism Textbook Definition: an economic system where all property is shared equally by the people in a community under the direction of a strong central government -The people share all properties equally. Resources are divided up according to individual need. Each person contributes to the nation’s overall economic success. Example: former Russia Mixed Market Economy Textbook Definition: an economic system that draws form both private enterprise economies and planned economies, to different degrees. Example: Canada’s health care, education and electricity generation are fun by the government. Privatization Textbook Definition: the conversion of government-owned and operated companies to privately held businesses. Example: Air Canada use to be a government owned airline. In 1989, it became fully privatized. TERMS SET 7 (BY: EMMA CAI) Recession: a cycle of economic contraction that lasts for six months or longer Productivity: the relationship between the number of units produces and the number of human and other production inputs needed to produce them Gross Domestic Product (GDP): the sum of all goods and services produced within a country during a specific time period, such as a year Consumer Price Index (CPI): a measurement of the monthly average change in prices of goods and services. Inflation: rising price caused by a combination of excess consumer demand and higher costs of raw material, component parts, human resources, and other factors of production Core inflation rate: the inflation rate after energy prices and food prices are removed Hyperinflation: an economic situation marked by soaring prices Deflation: the opposite of inflation occurs when prices continue to fall Unemployment rate: the percentage of the total workforce actively seeking work but currently unemployed TERMS SET 8 (BY: CHERYL LI) Fictional unemployment  Definition: A time period of unemployment due to transition between jobs or searching for another job.  Example: Movie stars are unemployed between movies. (Assuming they only make movies) Seasonal unemployment  Definition: Unemployment due to the change of season.  Example: Ice cream carts in the winter. Cyclical unemployment  Definition: Unemployment due to the economic cycle (during contraction/recession)  Example: Since the economy is in recession and businesses aren’t as strong as before, companies need to cut down their cost to prevent loses. One of the ways to cut down costs is to fire people, therefore causing cyclical unemployment. Structural unemployment  Definition: Unemployment due to the change of society’s needs on skills.  Example: Many tailors are unemployed because their skill is no longer in need. (Factories produce clothes now) TERMS SET 9 (BY: SOPHIE HOWE) Monetary Policy: a government plan to increase or decrease the money supply in an economy and to change banking requirements and interest rates.  This affects bankers’ willingness to make loans, and loaners’ willingness to apply for loans. Expansionary Monetary Policy: Government plan to increase the money supply to try to decrease the cost of borrowing.  These decreased interest rates will encourage borrowers (ex businesses) to make more investments. These investments lead to an increase in employment and cause for economic growth. Restrictive Monetary Policy does the opposite; reduce money supply to control rising prices, overexpansion and overly rapid economic growth. Fiscal Policy: a government plan entailing an increase or decrease of governmental taxation and spending. This is designed to control inflation, reduce unemployment and improve general welfare. Budget: an organizations plan on spending and raising money during a specific time period. Budget Deficit: the government spends more than it raises (through taxes) – spending > earning National Debt: the money the Federal government owes to individuals, governmental agencies and businesses who purchase Treasury bills, Treasury notes and Treasury bonds.  Real life Example: Israel bond advertisements Budget Surplus: government takes in more than it spends. Spending < earning Balanced Budget: total revenues earned by taxation equal total spending of year; spending = earning Will not erase national debt. Treasury bills are safe international investments. (If bills not always available, will be considered an unappealing investment and investors will turn to other countries.) Government will use balance or surplus to invest in infrastructure. TERMS SET 10 (NO ONE CONTRIBUTED ) Small Business Home-based Businesses Business plan Business Development Bank of Canada (BDC) Business incubator Venture capital Franchising Franchisee Franchisor TERMS SET 11 (BY: SATHYA SUBBIAH) Sole-Proprietorship: a business/firm that is owned and is run by one single person. This one person oversees all problems, and has full control over the firm. All profits go to this owner, but any losses that occur are the responsibility of the proprietor as well. It can be quite tricky to raise any kinds of long-term capital. It is the most common form of business in Canada. Examples: Tutors, financial planners, catering companies, freelance writers Partnership: A firm/business, which is being operated by two or more people. Having a partner makes a partnership easier to form and keep running than a sole proprietorship. Finances are easier to pay, and tasks can be divided up equally. However there is a negative to having a partner as well. Both partners will be responsible for the mistakes. A mistake from one partner does not mean only one partner getting the blame. Both will get the blame Examples: Ernst and Young is a Limited liability partnership. This means that it has points from a corporation and a partnership. Corporations: It is a firm in which owners in which the owners (shareholders) have limited financial liability. The board of directors, who are appointed by the shareholders, controls the company. A corporation can be either public or private. Usually a private company is that which has very few stockholders, and does not all stocks to be traded in the public stock market. A public corporation offers its stocks to the public, and as such has many stockholders. Examples: Private- KPMG, PricewaterhouseCoopers, IKEA. Public- Disney, Apple, Microsoft Non-profit Corporation: A corporation whose main objective is to achieve its goals, rather than gain profit. In Canada about 160,000 organizations are not for profit. Not for profit organizations are exempt from paying
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