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MU BUS 101C - Democracy, Business, and Intro to Stakeholder/ Stockholder Theories

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BUS 101C 1st Edition Lecture 2 Outline of Previous Lecture - Section 1: What is Business? Know grandchildren names & ages for extra credit What is Business?o Contract is Businesso Other business factors that support transactionso We teach silos, not interrelatedness 1776 – Adam Smith’s Wealth of Nationso The invisible hando USA largest military and economic economyo 1860’s – Karl Marx’s Das Kapitalo 1929 – Hoover and stock market crashCurrent Lecture- Section 2: Democracy, Business, and Intro to Stakeholder/ Stockholder Democracy – self governmento People are the governmento Types of governmento Problems with the economic systemo Two pillars of capitalism Business and innovationo New Producto Barriers to Entryo Post-war capitalistico Government is reactive Stakeholder/ Stockholder Theoryo Father of Stakeholder Theoryo Father of Stockholder Theory- Section 2:  Democracy – Self governmento People are the governmentThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Government reflects the will of the peopleo Types of government Capitalism – Market controlled through free markets Socialism – government controls markets- Public ownership- Common good- Contracts minimalized, little enforcement- Corruption main issue, not equal: bribes, disparity of wealtho Economic problems become political problems Keynesian – mixed markets, acting based on the will of the people- Insertion of government into market place based on the will of the peopleo Problems with economic system Economic issues come into politics, are never reasonable & rational, lack complete information, and have little social well being  When buying something, always betting that you are getting a good deal: Supply-valuable theory- Buyer – betting the product will go up in value- Seller – Betting the product will go down in valueo Two pillars of capitalism: Private Property Right to Contract- Private and self-interest Business and Innovationo New product: New product is released- High price, low quality New product further develops- Price lowers, quality rises Result of market efficiency- Competitors will decrease when they cannot keep up- Monopoly will form, causing efficiency to decreaseo Cut corners and raise prices until competitors reentero Barriers to entry Monopoly forms when company comes in and drops prices- New company will actively lose money for short amount of time- Old, similar companies won’t be able to keep up, go out of business No brakes on capitalist economy, monopolies are able to form- Cause disparity of wealtho Post-world war capitalistic Government regulation begins to put brakes on economy Government becomes player in economy- Follow Keynesian theoryo Bush – inefficient, government best when out of market and homes- Libertarian – government stays out of everything, no government in market of homeso Requires too much regulation and paperworko Government is reactive Respond to problems when they arise No problem, no government involvement- Fix problem yourself prior to government getting involved, better of Stakeholder/ stockholder Theory o Father of Stakeholder Theory – Edmund Freeman – 1980’s Stakeholders – all who have a claim in a company- Suppliers, customers, employees, stockholders, community & management- Legal, economic, political, and moral challenges that companies must recognize when making decisions- Main incentive is still to make moneyo If doesn’t make money or is not legal, company does not do ito Father of Stockholder Theory (Liaise-Faire) – Friedman Stockholders – act in the interest of increasing profits, working within the constraints of regulation- Only two questions ask: o Is it legal? If no, don’t do ito Will it make us money? If no, don’t do it- No attention to social responsibility – only responsibility is to utilize resources to increase


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