BUS 120 Midterm Exam (chapters 1-10)

Answer each question as thoroughly as you can (but be to the point). (10 points each)

1. Explain the types of policies used by the U.S. government to manage the U.S. economy.

The U.S. government uses 2 types of policies to manage the economy – monetary and
fiscal. These two policies make up the stabilization policy which aims to make output and
unemployment rates more consistent while stabilizing prices. Fiscal policies involve things like
tax rates and whether or not the government lowers or raises rates for different tax brackets.
Monetary policies are used by the government to control the money pool of a country. These
policies can be used to make it easier for people to get loans which may encourage business
growth and job creation.

2. How does unemployment affect economic stability?

Unemployment negatively affects economic stability. Unemployment is a vicious cycle

where companies raise wages to entice workers due to the labor shortage and in turn, raise the
prices of their products to offset the costs of raising wages. Raising prices can lead to fewer sales
and less profit, which pushes companies to drop workers or stop recruitment which adds to the
problem of unemployment.

3. Discuss ways in which an organization can help to ensure all members of the organization
participate in ethical compliance.

Organizations should aim to create a work culture that is supportive but strict when it
comes to ethics. Members of the organization should be trained on what is and isn’t okay and
guidelines should be put in place so that there are clear rules concerning different situations and
overall what to do when ethical problems occur. There should also be a written ethical code that
should be abided by by all employees.

4. A corporation must be managed on the principles of corporate governance. Explain what this
is.

Corporate Governance describes the role that directors, shareholders, and managers play
in making decisions for the company and who takes accountability when things go wrong.
Corporate Governance can essentially be split up into three groups: shareholders (the people who
own the corporation by buying stock), board of directors (people elected by shareholders), and
corporate officers (people tasked with managing the corporation’s daily activities).
5. Discuss the advantages and disadvantages of corporations.

An advantage of a corporation is limited liability. Limited liability is where the legal

system can only take the assets invested into the corporation by the investor and nothing else.
Corporations also benefit from continuity, which allows the corporation to be passed down and
continue on, as opposed to a business founder dying and the business going under. These
advantages are attractive to moneylenders and make them more open to giving loans. A
disadvantage of corporations is double taxation. The profits made by the corporation are taxed as
well as the returns made on an investor's investment. Another disadvantage is corporations can
be taken over forcefully through a tender offer – a situation in which a buyer directly purchases a
corporation’s stocks directly from shareholders. Corporations are also very expensive and
complex to start and are thoroughly regulated by the government.

6. Explain the difference between mergers and acquisitions, and why they are important forms
of corporate strategy.

A merger happens when two companies of relatively similar size combine to form a new
company. An acquisition is where a larger company buys a smaller company and helms the
operations of both companies. Both of these are important corporate strategies as they allow
companies to streamline and expand their operations while opening up new markets for different
products and services.

7. What are the advantages and disadvantages of globalization?

Through globalization, businesses can benefit from greater profits due to expansion into different
countries and access to new consumers. With this comes issues of exploitation, where some
businesses are taking advantage of lower wages and taxes in other countries to produce their
products. Also, businesses that are able to expand internationally are usually large, which often
crushes smaller companies in the area.

8. What is SWOT analysis?

SWOT stands for strengths, weaknesses, opportunities, and threats. In a SWOT analysis,
managers analyze the business environment and the company’s strengths in order to capitalize on
opportunities that can lead to the company’s growth. They also analyze the company’s overall
weaknesses as well as potential threats to the company in the form of competitors, consumer
demand, and government regulation.

9. Discuss the four main purposes of organizational goal setting.

By setting goals, a company can inform employees of the current direction the company
wants to take. It provides guidance to employees and allows them to make collective decisions
that go towards this goal. Goal-setting can also help companies understand where to focus their
resources and time to meet their specific target. It also helps to create a corporate culture that is
in line with what the company wants to achieve. If a company wants to be the best in the
industry, the culture should be more competitive and efficiency-focused. Goal-setting can also
help management assess productivity. If a goal isn’t met, management can find out what
happened and fix problems accordingly.

10. Differentiate among strategic, tactical, and operational plans.

Strategic plans are created to make strategic goals come to fruition. They involve
outlining the company’s goals and what steps are needed to meet these goals as well as where to
allocate certain resources to best achieve a goal. These plans are often thought up by the upper
management of a company. Tactical plans are often short-term plans that aim to carry out the
steps needed to meet a goal as outlined in the strategic plan. These plans are put together by the
middle and upper company management. Operational plans are plans that target regular
operations and set goals that need to be met in the next day, week, or month. These plans are
made by lower or middle management.

11. Discuss the types of grapevines within an organization and how accurate the grapevine can
be.

The gossip chain grapevine is when someone spreads information to many other people
who, in turn, may spread the message further or keep it to themselves. The cluster chain
grapevine involves someone telling only a select group of people who may spread or keep the
message to themselves. The grapevine has a lot of room for misinformation and is often used to
peddle rumors and gossip, but research shows that information spread through the grapevine is
75 to 95 percent accurate.

12. Discuss reasons why informal communication plays a growing role in an organization.

Informal communication is often used when there are big events like mergers or
acquisitions happening inside the company. Also, for companies that move facilities regularly,
employees often find themselves talking to each other as opposed to outside of work. Due to the
availability of different informational networks such as social media, it has also become so much
easier to engage in informal conversations.

13. What is a supply chain? How can supply chain management create a competitive advantage?

The supply chain is the chain of information, resources, and services where value is
added to the items passing through different stages until it reaches the consumer. Through supply
chain management, different parts of the supply chain coordinate work together which can lower
the costs of production and increase the quality of products.
14. Outsourcing has led to increasingly global supply chains. Describe three ways that a more
global supply chain might be risky for a company that outsources.

A problem with outsourcing is that there may be different issues in certain countries. A
country in which you source a certain material may experience a shortage of an item due to
things like the pandemic in recent years. Another problem is unassured product quality. Other
countries may not have the same quality standards and bad-quality products may be produced.
Another issue is social responsibility. Often, production in other countries is exploitative and this
sentiment may discourage people from buying a product.

15. Discuss management by objectives (MBO).

MBO is a form of collective goal-setting that involves everyone in the organization.

Managers are able to communicate with each other to set individual goals and formulate plans on
how to achieve said goals. They can then come together after a period to discuss productivity and
assess the work achieved towards the set goals.

16. Discuss the potential benefits to the employer from a flextime program.

A flextime program involves allowing employees to work on their own set time. While
employees are able to pick their own schedules, they are still expected to meet certain goals. This
program would allow employees to work at hours that best work for them and may lead to better
productivity. By allowing employees to work on their own terms, they may be happier and
contribute more to the company.

17. Describe the steps involved in the rational decision-making process.

The first step of the rational decision-making process involves management identifying
an issue and realizing that a decision needs to happen. The next step is where management tries
to find different solutions to the problem. The third step involves narrowing down the potential
solutions that came up in step two. The fourth step is where the best possible solution is chosen
after deliberation. The fifth step is where this solution is implemented and the sixth step is where
this implementation is assessed as to whether it worked or did not work.

18. Discuss why the majority of decisions made by managers are made under a state of
uncertainty, and how managers can minimize the risk of poor decisions

Decisions made by management are usually made under uncertainty as different

alternatives to problems and the ramifications of such alternatives are unknown to them. The
fast-paced environment of both the business world and the world, in general, can lead to more
uncertainty in management. To reduce the risk of poor decisions, managers must address these
problems from a reasonable and logical perspective. They must understand as much as they can
about the decision they are making.
19. Describe the current trends in labor-management relations in the United States.

I believe that there has been a push for better environments and treatment for employees
in the United States. Employees want to feel safe and have equal opportunities when it comes to
job opportunities. Management is expected to listen to their employees and act accordingly when
issues arise.

20. Explain the difference between labor relations and a labor union.
A labor union is an organization formed by employees to fight for things like workers’
rights and better working conditions. Labor relations is the process used between companies,
employees, and labor unions to discuss what each party wants and what decisions they need to
make to reach their goals.