What is a Business?
Marcus purchases a new video game for his younger sister as a birthday present. His sister is the person who actually plays and uses the game. In this situation, Marcus would be considered the customer, while his sister would be considered the:
Consumer
Whenever buyers and sellers come together—either physically or virtually—to voluntarily exchange money for goods and services, they are participating in what economists call a:
Market
A business conducts a PESTEL analysis to examine outside forces that could create opportunities, risks, costs, or challenges. What does the “P” in PESTEL represent? (Think: Government)
Political
A person recognizes an opportunity, organizes the resources needed to pursue it, and assumes the financial risk associated with starting a new business. This person is known as a(n):
Entrepreneur
A company is particularly skilled at managing inventory and distributing products efficiently, allowing it to keep shelves stocked while maintaining low prices. These unique capabilities or strengths are examples of:
Core Competencies
A company creates a written document explaining its expectations regarding honesty, confidentiality, conflicts of interest, workplace relationships, safety, and other employee behaviors.
Code of Conduct
A company discovers that customers have difficulty finding affordable transportation to work. It develops a low-cost transportation service specifically designed to solve that problem. The close match between the company's service and the customers' problem is called:
Problem-Solution Fit
In a highly competitive market, many different businesses sell similar products, customers have plenty of choices, and individual businesses generally have little ability to control the price they charge. These businesses have relatively little:
Market Power
A restaurant notices that customers are increasingly interested in healthier foods, vegetarian options, and products containing fewer artificial ingredients. Which PESTEL factor best represents this change in consumer preferences?
Social
Instead of accidentally discovering an opportunity, an entrepreneur deliberately studies consumers, analyzes competitors, conducts surveys, and researches market trends in an effort to identify unmet needs. Which pathway is being used?
Search
A company's statement describes its values and aspirations and explains what the organization ultimately wants to become and the impact it hopes to make in the future. This is best described as a:
Vision Statement
A company gives employees bonuses and public recognition when customers specifically praise them for exceptional service. These rewards are intended to encourage employees to repeat desirable behavior.
Incentives
A company designs a product that solves a frustrating problem for its customers and satisfies a need better than the products currently available. The company has successfully:
Created Value
At the current price of a product, consumers want to purchase exactly the same quantity that businesses are willing to produce and sell. There is neither a shortage nor a surplus in the market. This price is known as the:
Equilibrium Price (Market Equilibrium)
During a recession, unemployment rises, household incomes fall, and consumers become more cautious about spending money on nonessential products. Which PESTEL factor is primarily affecting businesses?
Economic
An entrepreneur begins by examining the skills, knowledge, resources, and personal connections already available to her. She then considers what type of business she could create using those existing resources. Which pathway to product ideas is she following?
Effectuate
A company's statement briefly explains why the organization exists, what it does, whom it serves, and how its activities help accomplish its long-term goals. This is best described as a:
Mission Statement
A manager discovers that her brother owns one of the companies bidding for a major contract with her employer. Her personal relationship could influence—or appear to influence—her business decision. This situation is best described as a:
Conflict of Interest
A business receives $200,000 during the year from selling its products. It spends $160,000 producing those products and operating the business. The entire $200,000 received from customers would be classified as:
Revenue
A company finds a way to provide customers with greater value than its competitors, allowing the company to attract more customers, potentially charge higher prices, or earn greater profits. The company has developed a:
Competitive Advantage
A state government passes a new law requiring every restaurant with more than 20 employees to provide paid sick leave. Businesses must follow the requirement even though the government does not provide money to help cover the additional cost. This government action is best classified as a:
Mandate
During the design-thinking process, a company interviews customers, observes how they currently solve a problem, and tries to understand their experiences, frustrations, needs, and wants before developing a solution. Which stage is the company completing?
Empathizing
An ice cream company sells products to customers and earns profits for its owners, but its central purpose is addressing social problems involving workers, communities, farmers, animals, and the environment. Which type of organization does this best represent?
Social Enterprise
A company is deciding whether to close a factory. The decision would affect employees who work there, customers who purchase its products, suppliers who sell materials to the factory, and people living in the surrounding community, who are called...
Stakeholders
A company produces a jacket that costs $80 to provide. A customer values the jacket at $130 and purchases it for $100. Based on the value model presented in the text, how much of the jacket's value is captured by the business as profit?
$20
A luxury hotel does not attempt to compete by offering the lowest prices. Instead, it provides exceptional service, unique rooms, premium amenities, and other features designed to make customers view its offering as different from competing hotels. Which strategy is it using?
Differentiation
A company is considering opening a factory in a city where land is inexpensive and unemployment is high. However, the company discovers that the area does not have enough workers with the specialized skills necessary to operate its equipment. This information primarily affects the company's:
Viability
A development team has several promising ideas for a new product but does not want to spend millions of dollars manufacturing the final version yet. Instead, it creates an inexpensive preliminary model that can be evaluated and improved, called...
Prototype
An organization operates retail stores and earns more revenue than it spends. However, none of the surplus is distributed to owners. Instead, the organization reinvests the money into programs that serve the public good. The organization is best classified as a:
Nonprofit
A business discovers a defect in one of its products. Fixing the problem will be expensive, but continuing to sell the product could potentially harm customers. Both choices have significant consequences, and there is no obvious answer that completely avoids harm. This situation is best described as:
Ethical Dilemma
A company produces a product that costs $70 to provide. Customers believe the product is worth as much as $125, but the company sells it for $95. How much profit and consumer surplus is created?
$25 Profit; $30 Consumer Surplus
A large manufacturer produces 100,000 units each month. Because its fixed costs can be spread across so many units and it can use specialized equipment efficiently, its average cost per unit is much lower than that of a small competitor. This advantage is known as:
Economies of Scale
A state government wants to encourage companies to manufacture solar panels, so it offers businesses financial assistance to help cover part of their production costs. This type of government action is best classified as a:
Subsidy
A software company has a complicated idea for a new app but wants to learn whether customers actually find its main feature useful before spending significant time and money developing every planned feature. It releases the simplest functional version that provides enough value to receive customer feedback. This is a:
Minimum Viable Product (MVP)
A company publicly claims that integrity is one of its most important principles. However, managers routinely pressure employees to deceive customers in order to meet aggressive sales targets. Which aspect of the organization is most clearly conflicting with its stated core values?
Culture
A company facing an ethical dilemma estimates the positive and negative consequences of several possible decisions for employees, customers, owners, suppliers, and the community. It then chooses the option expected to produce the greatest overall benefit relative to its costs. It used a...
Cost and Benefit Analysis