Ch. 2, p. 37Ethics the study of right and wrong and how people make choices.Ethical Decision a decision deemed right according to a standardBusiness Ethics using moral standards for business situations.Engle v. R. J. Reynolds lawsuit against tobacco companies led to $246 billion in settlements.p. 39Conflict of Interest a businessperson takes advantage of a situation for his or her own personal interest rather than for the employers interest.Anything given to a person in a business deal is classified as a bribe.Conflict of interest arises when an employee has a personal circumstance that interferes with his obligation or when he uses his status in the company for personal gain.Fig. 2.1. Factors that influence ethical behaviors.p. 40Individual Factors Affecting EthicsIndividual knowledge of an issue, personal values, and personal goalsSocial Factors Affecting EthicsCultural norms gratuities taken in this country, but maybe not another.Co-Worker if a co-worker does something, like call 24/7, it might influence other co workers to call 24/7 and make it a norm.Significant others spouses, relatives, and friends can change what is ethical and unethical in the workplace.Use of InternetOpportunity as a Factor Affecting EthicsPresence of Opportunity Opportunity is the amount of freedom an organization gives an employee to behave unethically. For example, one person is on register handling money and another is serving the food, not one doing both.Ethical codesEnforcementp. 41Sarbanes-Oxley Act of 2002 new legal protection for those who report corporate misconduct. Basically stricter punishments for misconduct in a business environment.Code of ethics a guide that shows acceptable and ethical behavior by an organization. It shows the uniform policies, standards, and punishment for violations. p. 42Ethics officers are appointed in some companies in order to be a person to consult for what is the right and wrong thing to do.Whistle-Blowing informing the press or government officials about unethical practices within ones organization.Fig. 2.2 example of a Code of Ethicsp. 44Table 2.1 Guidelines for Making Ethical DecisionsSocial Responsibility the recognition that business activities have an impact on society and the consideration of that impact in business decision making. Examples on p. 44-47p. 48Caveat Emptor Latin phrase meaning let the buyer beware. Basically means what you see is what you get and if its not what you expected then too bad.Table 2.2 shows 6 early government regulations.p. 49Economic model of social responsibility society will benefit most when business is left alone to produce and market profitable products that society needs.Socioeconomic Model of Social Responsibility business should emphasize the impact of its decisions on society.p. 50Pros and Cons of Social ResponsibilityTable 2.3 Comparison of Economic and Socioeconomic Models of Social Responsibilityp. 51Consumerism all activities undertaken to protect the rights of consumers. The Right to Safety the products they purchase must be safe for their intended use, must include thorough and explicit directions for proper use, and must be tested by the manufacturer to ensure product quality and reliability.Corrective can be expensive, increase number of law suits, and consumer demand.Right to be Informed consumer must have access to complete information about ingredients and nutrition must be provided on food containers, information about fabrics and laundering methods must be attached to clothing and lenders must disclose the true cost of borrowing the money they make available to customers who purchase merchandise on credit.p.52Right to Choose consumers must have a choice of products, offered by different manufacturers and sellers, to satisfy a particular need.The Right to be Heard The companies must listen and take appropriate action when customers complain.The Right to Consumer Education people are able to be informed about their rights as consumers.p. 52-54 Major Federal Legislation Protecting Consumersp. 55Minority a racial, religious, political, national, or other group regarded as different from the larger group of which it is a part and that is often singled out for unfavorable treatment.Affirmative Action Program a plan that increases the number of minority employees at all levels of the organization.Fig 2.3 shows the comparative income levels of different minoritiesp. 562 Problems with affirmative action plans: Quotas, or reverse discrimination and Equal Employment Opportunity Commission (EEOC)Equal Employment Opportunity Commission (EEOC) a government agency that has the power to investigate complaints of employment discrimination and sue firms that practice it.Hard-core Unemployed workers with little education or vocational training and a long history of unemployment.Fig 2.4 Relative Earnings of Male and Female Workersp. 57National Alliance of Business (NAB) a joint business-government program to train the hard-core unemployed.Pollution the contamination of water, air, or land through the actions of people.p. 58: Table 2.5: Major Environmental Lawsp. 59: Air PollutionAviation emission of carbon dioxide from the jets causes air pollution and the carbon dioxide combined with other gases cause a stronger effect on the atmosphere.Carbon monoxide, hydrocarbons, weather and geography affect the air pollution.p. 60: Land PollutionIssues with land Pollution is that:(1) How to restore damaged or contaminated land at a reasonable cost(2) How to protect unpolluted land from future damageNoise PollutionNoises from ongoing events, machinery, traffic, or everyday life, caused many people to suffer from permanent hearing lossp. 62: Developing a Program of Social ResponsibilityWe need these four steps(1) Commitment of Top Executives(2) Planning(3) Appointment of a Director(4) The Social Audit a comprehensive report of what an organization has done and is doing with regard to social issues that affect it. This is what they use in order to know whether or not to fix social responsibilityFunding the Program(1) Management can pass the cost on to consumers at a higher price(2) The Corporation may have to absorb the cost; it turns into a business expense and profit is reduced(3) The Federal Government can pay for all or part through tax reductions.Ch. 3, p. 71International Business encompasses all business activities that involve exchange across national boundariesAbsolute Advantage the ability to produce a specific product more efficiently than any other nationComparative Advantage the ability to produce a specific product more efficiently than any other product.p. 72 - 73Exporting selling and shipping raw materials or products to other nations.Importing purchasing raw materials or products in other nations and bringing them into ones own country.Balance of Trade the total value of its exports minus the total value of its imports over some period of time. If the country imports more than it exports, the balance of trade is negative, or unfavorable.Trade Deficit a negative balance of tradep. 74Are trade deficits bad?Balance of Payments the total flow of money into a country minus the total flow of money out of that country over some period of time.p. 75Import Duty (Tariff) a tax levied on a particular foreign product entering a country.Revenue tariffs imposed solely to generate income for the government.Protective Tariffs imposed to protect a domestic industry from competition by keeping the price of competing imports levels with or higher than the price of similar domestic products.Dumping the exportation of large quantities of a product at a price lower than that of the same product in the home marketNontariff Barriers a nontax measure imposed by a government to favor domestic over foreign suppliersEx. of nontariff barriers:Import Quota a limit on the amount of a particular good that may be imported into a country during a given period of time. Embargo a complete halt to trading with a particular nation or of a particular product.Foreign-Exchange Control a restriction on the amount of a particular foreign currency that can be purchased or sold.Currency Devaluation the reduction of the value of a nations currency relative to the currencies of other countriesp. 76Cultural Barriers can be a nontariff barrier. Reasons for Trade Restrictions:(1) To equalize nations balance of payments(2) To protect new or weak industries(3) To protect the health of citizens(4) To retaliate for another nations trade restrictions(5) To protect domestic jobsReasons against Trade Restrictions:(1) Higher prices for consumers(2) Restriction of consumers choices(3) Misallocation of international resources(4) Loss of Jobsp. 78-80, Expected Outlook of Tradep. 81General Agreement on Tariffs and Trade (GATT) an international organization of 153 nations dedicated to reducing or eliminating tariffs and other barriers to world trade.Fig 3.4 WTO members that are in the World Merchandise Tradep.82The Tokyo Round a gathering in Tokyo of approximately 100 nations for GATT negotiationsThe Uruguay Round launched to extend trade liberalization and widen the GATT treaty to include many different products.World Trade Organization (WTO) powerful successor to GATT that incorporates trade in goods, services, and ideasThe Doha Round WTO members further reduce trade barriers through multilateral trade negotiations over the next three years.p. 83 - 85Fig 3.5 Map showing the EUEconomic Community an organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies. European Union (EU)The North American Free Trade Agreement (NAFTA)The Central American Free Trade Agreement (CAFTA)The Association of Southeast Asian NationsThe Commonwealth of Independent StatesTrans-Pacific Partnership (TPP)The Common Market of the Southern Cone (MERCOSUR)The Organization of Petroleum Exporting CountriesLicensing a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation.p. 86 - 90Letter of Credit in favor of the exporter, meaning that the funds are tied specifically to the trade contract involved. Bill of Lading document issued by a transport carrier to an exporter to prove that merchandise has been shipped.Draft issued by the exporters bank, ordering the importers bank to pay for the merchandise, thus guaranteeing payment once accepted by the importers bank.Joint Ventures a partnership formed to achieve a specific goal or to operate for a specific period of time.Totally Owned Facilities its own production and marketing facilities in one or more foreign nations.Direct Investment provides complete control over operations, but it carriers a greater risk than the joint venture. Euro factories supplying neighboring countries as well as their own local marketStrategic Alliance a partnership formed to create competitive advantage on a worldwide basis. Trading Company a link between buyers and sellers in different countries.Countertrade an international barter transaction in which goods and services are exchanged for different goods and services.Multinational Enterprise a firm that operates on a worldwide scale without ties to any specific nation or region.Table 3.3 The Ten Largest Foreign and U.S Multinational CorporationsExport-Import Bank of the United States an independent agency of the U.S government whose function is to assist in financing the exports of American firms. p. 92-93Multilateral Development Bank (MDB) an internationally supported bank that provides loans to developing countries to help them grow.International Monetary Fund (IMF) an international bank with 188 member nations that makes short-term loans to developing countries experiencing balance-of-payment deficits. Ch. 4, p. 106 - 109Sole Proprietorship a business that is owned (and usually operated) by one person. Advantages of Sole Proprietorships(1) Simplest and Cheapest(2) Successful sole proprietors are often proud of his or her accomplishments(3) All profits becomes personal earnings(4) They dont pay special state and federal income taxes that corporations pay.(5) Sole Proprietors make their own decisions, they are the bossDisadvantages of Sole Proprietorships(1) Unlimited Liability a legal concept that holds a business owner personally responsible for all the debts of the business.(2) If the sole proprietor dies, retires, or is legally incompetent, the company ceases(3) Banks, suppliers, and other lenders usually are unwilling to lend large sums of money to sole proprietorships.(4) The proprietor is the sole manager(5) They may find it harder to keep competent helpp. 110Partnership a voluntary association of two or more persons to act as co-owners of a business for profitGeneral Partners a person who assumes full or shared responsibility for operating a business. General Partnership a business co-owned by two or more general partners who are liable for everything the business does.Limited Partner a person who invests money in a business but who has no management responsibility or liability for losses beyond his other investment in the partnership.Limited Partnership a business co-owned by one or more general partners who manage the business and limited partners who invest money in it.p. 111 - 114Master Limited Partnership (MLP) or publicly traded partnership, a limited partnership that has units of ownership that can be traded on security exchanges much like shares of ownership in a corporation.Articles of Partnership an agreement listing and explaining the terms of the partnership.Partnership agreement componentsAdvantages of Partnership(1) Easy to form(2) A partnership usually has more capital available due to their ability to pool their funds(3) Concerned with the operations of the firm(4) Partners often have complementary skills(5) All profits belong to the owners of the partnership.(6) No taxes, but must file an annual information return that states the names and addresses of all partners involved in the businessDisadvantages of Partnership(1) Each general partner has unlimited liability for all debts of business(2) Management disagreements like spouses or a relative in the business(3) Partnerships end if one of the general partners withdraws, dies, or declares legally incompetent.(4) Buying out a partner Beyond the Partnershipp. 115Corporation an artificial person created by law, with most of the legal rights of a real person.Stocks shares of ownership of a corporationStockholders people who own a corporations stockClosed Corporations a corporation whose stock is owned by relatively few people and is not sold to the general public.Open Corporation the stock can be bought and sold by any individualForming a CorporationDomestic Corporation a corporation in the state in which it is incorporatedForeign Corporation corporation in any state in which it does business except the one in which it is incorporatedAlien Corporation corporation chartered by a foreign government and conducting business in the United StatesCommon Stock stock owned by individuals or firms who may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of othersp. 117Preferred Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common-stock ownersDividend a distribution of earnings to the stockholders of a corporationProxy a legal form listing issues to be decided at a stockholders meeting and enabling stockholders to transfer their voting rights to some other individual or individuals.Board of Directors the top governing body of a corporation and is elected by the stockholders.Corporate Officers appointed by board of directorsp. 118 - 120Advantages of Corporations(1) Limited Liability feature of corporate ownership that limits each owners financial liability to the amount of money that he or she has paid for the corporations stock.(2) Best for raising capital(3) Ownership is transferred when a sale is made.(4) A corporation exists independently of its owners and survives them.(5) They are able to recruit more skilled, knowledgeable, and talented managersDisadvantages of Corporations(1) Forming a corporation can be a relatively complex and costly process(2) Must meet various government standards before it can sell its stocks to the public.(3) Large corporations may employ thousands of employees and conflict can arise.(4) Must pay tax on their profits and a personal income tax on the profits of dividends.(5) No secrecy because they are required to submit detailed reports to government agencies and to stockholders.p. 121 - 122S-Corporation a corporation that is taxed as though it were a partnership.Limited-Liability Company (LLC) form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those formed of ownership.Not-for-profit Corporation a corporation organized to provide a social, educational, religious, or other service rather than to earn a profit.p. 123Joint Venture an agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of timeSyndicate a temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital.p. 124Corporate GrowthMerger purchase of one corporation by anotherAcquisition essentially the same thing as a merger, but the term usually is used in reference to a large corporations purchases of other corporations.Hostile Takeover a situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger.Tender offer an offer to purchase the stock of a firm targeted for acquisition at a price just high enough to tempt stockholders to sell their shares.Proxy fight a technique used to gather enough stockholder votes to control a targeted companyp. 125 - 126Horizontal merger- a merger between firms that make and sell similar products or services in similar markets.Vertical Mergers a merger between firms that operate at different but related levels in the production and marketing of a product.Conglomerate Merger takes place between firms in completely different industries.