Exam 1 Study Guide
Chapters 1, 2, 14, 15 and 16
Chapter 1: The Dynamics of Business & Economics
What is any business’s primary objective?
Earn a profit
Be able to articulate “the” primary success factor in a business’s ability to attain its primary objective. (3 words!) It is something you do better than your competitors and you continue doing it over time.
Sustainable competitive advantage: doing something better than your competitors and continuing to do so time and time again.
Be able to differentiate between a product and a service.
Product: A good or service with tangible and intangible characteristics that provide satisfaction and benefits (Buying a new car battery, that’s a product)
Service: A service is an action performed by someone else (labor). (Installation of that battery is a service)
Who are a company’s stakeholders? Be able to list a number of them.
Stake Holders: Those who have a stake a business
What are the primary functions of management?
Management: Focus on employees (Coordinating, Organizing, Motivating employees) Production and Manufacturing (Plan Activities, Organize staff and control tasks
What are the primary activities of marketing?
Marketing (sales): Focus on satisfying customers
Determine what products customers want (Advertising)
Plan and develop products (Personal selling and sales promotions) determine distribution, place and promotion (Publicity)
Name the three factors of production and provide an example of each. (Note: These are three types of resources!) (slide 19)
1. Natural resources (land, water, air minerals, trees)
2. Human Resource (People=Labor)
3. Financial Resources (Capital=Money
Understand the differences between Communism, Socialism and Capitalism.
Communism: A society in which the people, without regard to class, own all the nations resources
Socialism: System in which the government owns and operates basic industries but individuals own most business.
Capitalism: Free Enterprise: individuals own and operate majority of businesses providing goods and services
Which countries practice pure capitalism, pure socialism or pure communism?
Communism: China, North Korea, Cuba
Socialism: Sweden, India, Israel
Capitalism: United States, Japan, Austria, Canada
What is supply and demand, and what is the general theory behind supply and demand? What type of pricing do you have when …
….supply is high and demand is low? …supply is low and demand is high? …supply and demand are roughly equal?
Be able to read and interpret a supply and demand graph.
Supply & Demand: Distribution of resources and products are determined by supply and demand.
When the supply is low and demand is high, prices are typically higher than usual.
When supply is high and demand is low, prices are typically lower than usual.
Be able to articulate the four types of competition and understand the differences between them.
1. Pure Competition: Many small business in same product of market. EX: Agricultural, commodities(wheat, corn, cotton) Difference in the product: minimal if any Pricing: Determined by forces of supply and demand
2. Monopolistic Competition (want to be #1): Fewer business than in pure. EX: common consumer products (aspirin, soda, and small electronics) Differences: Small mainly in packaging and in features delivers the same benefit.
3. Oligopoly: Very few business selling a product. EX: airline, automobile. Differences: feature can vary greatly, but products deliver the same benefit. Pricing Determined by the provider as they control a larger portion of the market.
4. Monopoly: One business providing a product in a given market. Allowed by gov due to huge cost associated with supplying the product. EX: Utility companies (WE Energies). No differences since its just one product. Pricing: subject to government regulated pricing.
What is the definition of an