AP® Business with Personal Finance Unit 4 flashcardsManagement and Strategy

Management

Planning, organizing, leading and evaluating a business's people, money and physical resources to reach its goals.

Topic 4.1: Management and Leadership

Planning, organizing, leading, evaluating

The four functions of management: set goals and plans, arrange people and resources, motivate and guide the team, and check results against goals.

Topic 4.1: Management and Leadership

Leadership skills

Sharing the vision and mission, building strong teams, settling conflicts and motivating people.

Topic 4.1: Management and Leadership

Communication skills

Expressing ideas clearly, persuading, listening with empathy, and understanding and acting on feedback.

Topic 4.1: Management and Leadership

Hourly wage vs. salary

An hourly wage pays for each hour worked. A salary is a fixed yearly amount split across pay periods, no matter the hours.

Topic 4.1: Management and Leadership

Commission

Pay based on a percentage of sales. Example: 3% of $200,000 in car sales = $6,000.

Topic 4.1: Management and Leadership

Piece rate

Pay for each unit a worker produces, such as $25 for each bookcase assembled.

Topic 4.1: Management and Leadership

Profit sharing

Giving employees a share of the company's profits, on top of their regular pay, to reward company success.

Topic 4.1: Management and Leadership

Employee benefits

Compensation beyond pay, like help with health insurance premiums, retirement plans, paid time off and tuition reimbursement.

Topic 4.1: Management and Leadership

Employee retention

Keeping good employees through raises, promotions, bonuses, flexibility and a positive culture. It usually costs less than hiring and training new ones.

Topic 4.1: Management and Leadership

Full-time, part-time and contract work

Businesses hire some people full time and others part time, temporarily or on contract, depending on the work that needs doing.

Topic 4.1: Management and Leadership

Key performance indicator (KPI)

A number a business tracks to measure performance and progress toward its goals, such as profit margin or on-time delivery.

Topic 4.2: Evaluating Performance Using KPIs

Financial KPIs

Measures of financial health, such as revenue, gross profit, operating profit, profit margins, COGS, operating expenses and cash flow.

Topic 4.2: Evaluating Performance Using KPIs

Marketing and sales KPIs

Measures of marketing and sales progress, such as customer acquisition cost, lifetime value, satisfaction, retention, total sales and market share.

Topic 4.2: Evaluating Performance Using KPIs

Operations KPIs

Measures of how well a business makes and delivers products, such as per-unit cost, delivery cost, order accuracy and on-time delivery.

Topic 4.2: Evaluating Performance Using KPIs

Market share

A business's share of total sales in its market. Gaining market share is a common sign of competitive advantage.

Topic 4.2: Evaluating Performance Using KPIs

Benchmark

A reference point for judging a KPI. It can come from the business's own past results or from industry standards.

Topic 4.2: Evaluating Performance Using KPIs

Customer retention

How many existing customers keep buying from a business. It's tracked as a marketing and sales KPI.

Topic 4.2: Evaluating Performance Using KPIs

Strategy

A plan for reaching a goal, such as gaining competitive advantage, cutting costs or growing revenue.

Topic 4.3: Strategy and Decision Making

Tactics

The specific actions a business takes to carry out its strategy, such as a new ad campaign or a new class schedule.

Topic 4.3: Strategy and Decision Making

PACED decision-making model

A step-by-step way to make big decisions: define the Problem, list Alternatives, set Criteria, do an Evaluation of each option, then make the Decision.

Topic 4.3: Strategy and Decision Making

Decision criteria

The factors used to compare options. They can be financial, like ROI and costs, or nonfinancial, like reputation, mission and effects on employees.

Topic 4.3: Strategy and Decision Making

Return on investment (ROI)

The added profit from an investment ÷ its cost. Example: $10,000 added profit ÷ $25,000 cost = 40%.

Topic 4.3: Strategy and Decision Making

Strategic framework

A tool, like Porter's Five Forces or SWOT, for weighing a business's options against its goals and its internal and external conditions.

Topic 4.3: Strategy and Decision Making

Imperfect decision making

Managers often must choose between conflicting criteria using limited or unclear data, so even good decisions carry uncertainty.

Topic 4.3: Strategy and Decision Making

Porter's Five Forces

A framework for judging how competitive and profitable a market is: rivalry, threat of new entrants, threat of substitutes, customer power and supplier power.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Competitive rivalry

How intense competition is among existing businesses, based on how many rivals there are, how similar their products are and their pricing power.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Threat of new entrants

How easily new businesses can enter a market. It's strong when barriers to entry are low.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Threat of substitutes

How easily customers can meet the same need with a different kind of product, especially a cheaper or easier one.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Customer power

Buyers' ability to push prices down. It's strong when there are few customers, each buys a lot, and switching costs are low.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Switching costs

The money and hassle a customer faces in changing to a different product, brand or supplier.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Supplier power

Suppliers' ability to raise input costs. It's strong when there are few suppliers and switching to another one is costly.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

SWOT analysis

A framework listing a business's internal Strengths and Weaknesses and the external Opportunities and Threats it faces.

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Strengths and weaknesses

Internal advantages (like skilled staff or strong brands) and internal disadvantages (like outdated technology or limited funds).

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis

Opportunities and threats

Outside factors beyond a business's control that could help it (like market growth) or hurt it (like a new rival or rising input costs).

Topic 4.4: Strategic Frameworks: Porter’s Five Forces and SWOT Analysis