BUS Exam 2 -- Ch 5-8

what are the 3 questions to ask before forming a global franchise?

1. Will your intellectual property be protected?

2. Can you give proper support to global partners?

3. Are you able to adapt to franchise regulations in other countries?

sole proprietorship

a business that is owned, and usually managed, by one person

partnerships

a legal from of business with two or more owners

corporations

a legal entity with authority to act and have liability apart from its owners

what are the advantages of a sole proprietorship?

1. ease of starting and ending the business

2. being your own boss

3. pride of ownership

4. leaving a legacy

5. retention of company profits

6. no special taxes

what are the disadvantages of a sole proprietorship?

1. unlimited liability

2. limited financial resources

3. management difficulties

4. overwhelming time commitment

5. few fringe benefits

6. limited growth

7. limited life span

what are the types of partnerships

1. general

2. limited

3. master limited

general partnerships

a partnership which all owners share in operating the business and in assuming liability for the business's debts

limited partnerships

a partnership with one or more general partners and one or more limited partners

master limited partnerships

a partnership that looks much like a corporation (in that it acts like one and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax

what is the difference between general and limited partners

general partners are owners who have unlimited liability and are active in managing the firm; limited partners are owner who invests money in the business but don't have any management responsibility or liability for losses beyond the investment

what are the advantages of partnerships?

1. more financial resources

2. shared management and pooled skills and resources

3. longer survival

4. no special taxes

what are the disadvantages of partnerships?

1. unlimited liability

2. division of profits

3. disagreements among partners

4. difficulty of termination

conventional (C) corporation

a state-chartered legal entity with authority to act and have liability separate from its owners -- its stockholders

what are the advantages of corporations?

1. limited liability

2. ability to raise more money for investment

3. size

4. perpetual life

5. ease of ownership change

6. ease of attracting talented employees

7. separation of ownership from management

what are the disadvantages of corporations?

1. initial cost

2. extensive paperwork

3. double taxation

4. two tax returns

5. size

6. difficulty of termination

possible conflict with stockholders and board of directors

S corporation

a unique government creation that looks like a corporation but is taxed like sole proprietorship's and partnerships

limited liability company (LLC)

a company similar to an S corporation but without the special eligibility requirements

what are the advantages of LLCs?

1. limited liability

2. choice of taxation

3. flexible ownership rules

4. flexible distribution of profits and losses

5. operating flexibility

what are the disadvantages of LLCs?

1. no stock

2. limited life span

3. fewer incentives

4. taxes

5. paperwork

merger

the result of two firms forming one company

acquisition

one company's purchase of the property and obligations of another company

3 major types of corporate mergers

1. vertical

2. horizontal

3. conglomerate

vertical merger

the joining of two companies involved in different stages of related businesses

(ex: a soft drink company and an artificial sweetener maker)

horizontal merger

the joining of two firms in the same industry

(ex: a soft drink company and a mineral water company)

conglomerate merger

he joining of firms in completely unrelated industries

(ex: a soft drink company merging with a snack food company)

franchise agreement

n arrangement whereby someone with a good idea for a business (the franchisor) sells the rights to use the business name and sell a product or service (the franchise) to others (the franchisees) in a given territory

what are the advantages of franchises?

1. management and marketing assistance

2. personal ownership

3. nationally recognized name

4. financial advice and assistance

5. lower failure rate

what are the disadvantages of franchises?

1. large start-up costs

2. shared profits

3. management regulation

4. coattail effects

5. restrictions on selling

6. fraudulent franchisors

cooperative (co-op)

a business owned and controlled by the people who use it -- producers, consumers, or workers with similar needs who pool their resources for mutual gain

Which form of business ownership is the most common in the U.S.?

sole proprietorship

When Greg started his window-washing business, he wanted to keep things simple. As recommended, he filed a record of the business with the state where he resided. He carefully watched his expenses including state filing expenses and licensure requirements. Greg's financial resources were limited, but so were his concerns; after all, "he was the business." Greg's business is a _____________.

sole proprietorship

Unlimited liability means

the business is responsible for the debt it incurs. If the business cannot pay its bills, the debt burden transfers to the owner(s), and he/she/they are liable for all debt

When going into a partnership, you should always:

put all terms of the partnership into writing, in a partnership agreement

The owners of a corporation are called:

stockholders

Which of the following lists characteristics typical of a C corporation?

Taxed separate from its owners who also enjoy limited liability.

Joe and Mark would like to start a new business selling a product new to the U.S., the Peraves Monotracer. This is a motorcycle-type vehicle that is encased in a sort of shell, so that the rider can ride this product in any kind of weather. Joe and Mark have done a considerable amount of research on this product, and think it would be successful in the U.S. However, they are still concerned about the risk of a new venture and both would like to avoid losing any personal assets. They should organize their firm as a:

corporation

One of the key advantages of a franchise is:

receiving management and marketing expertise from the franchisor

International franchising is:

a successful growth area for both small and large franchises

In a a ________, members democratically control the business by electing a board of directors that hires professional management to run the business.

cooperative

Entrepreneurship

accepting the risk of starting and running a business

Why do some people take the entrepreneurial challenge?

*opportunity

*profit

*independence

*challenge

what components do a good business idea have

* it fills customer's needs

* you have skills and resources to start a business

* you can sell the product or service at a price customers are willing and able to pay -- and still make a profit

* you can get your product or service to customers before your window of opportunity closes (before competitons w/ similar solutions beat you to it)

* you can keep the business going

entrepreneurial team

group of experienced people from different areas of business who join together to form a management team with the skills needed to develop, make, an market a new product

micropreneurs

entrepreneurs willing to accept the risk of starting and managing the type of business that remain small, lets them do the kind of work they want to do, and offers them a balanced lifestyle

what are challenges for micropreneurs?

* Getting new customers

* Managing time

* Keeping work and family tasks separate

* Abiding by city ordinanes

* Managing risk

affiliate marketing

an online marketing strategy in which a business rewards individuals or other businesses (affiliates) for each visitor or customer the affiliate sends to its website

intrapreneurs

* creative people who work as entrepreneurs within corporations

enterprise zones

specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support

(sometimes called empowerment zones or enterprise communities)

incubators

centers that offer new businesses low-cost offices with basic business services

small business

a business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size (set by the SBA) in terms of employees or annual receipts

what are the hints for learning how to run your own business?

* learn from others

* get experience

* take over a successful firm

business plan

a detailed written statement that describes

what must a business do?

* alyze the competition

* calculate start-up money needed

* cover details of operation

what are the potential sources of capital for entrepreneurs?

* personal savings

* family and business associates

* banks and finance institutions

* angels and venture capitalists

* government agencies

what are the sections of a business plan?

* Cover letter

* Section 1 -- Executive Summary

* Section 2 -- Company Background

* Section 3 -- Management Team

* Section 4 -- Financial Plan

* Section 5 -- Capital Required

* Section 6 -- Marketing Plan

* Section 7 -- Location Analysis

* Section 8 -- Manufacturing Plan

* Section 9 -- Appendix

venture capitalist

individuals or companies that invest in new businesses in exchange for partial ownership of those businesses

Small Business Administration (SBA)

a U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans

Small Business Investment Company (SBIC)

a program through which private investment companies licensed by the SBA lend money to small businesses

market

people with unsatisfied wants and needs who have both the resources and the willingness to buy

Service Corps of Retired Executives (SCORE)

an SBA office with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses)

why do many businesses have difficulty getting started in global business?

1. hard to find financing

2. not knowing how to get started/not understanding cultural differences between markets

3. the bureaucratic paperwork

what are the advantages small businesses have in international trade

* overseas buyers often prefer dealing with individuals small companies

* usually faster shipping

* small companies can provide a wide variety of suppliers

* personal service and undivided attention for customers

Reed Hastings created Netflix. His inspiration came from the fact that he had to pay a sizeable late fee for returning a DVD beyond the due date at a rental store. It took a few tries to develop the winning business model. Which statement accurately describes his key to success?

His idea solved a problem

Leveling the playing field for home-based businesses, ___________ has (have) made starting a home-based business much more affordable

broadband Internet connections and other technologies

Andre works for a company that promotes an entrepreneurial culture. Employees are encouraged to discuss new ideas. Development time is provided on the job for those ideas that float to the top. Employees who use their creative talents to generate ideas and create products within large companies are called

intrapreneurs

Which of the following is a false statement about small business?

The first job for most Americans is unlikely to be in a small business.

Mriam Njunge wants to start a small business importing some products from her native Kenya. Before she starts, some good advice to Miriam would be

talk to others who have been or are in the import business

While on a trip to South Africa, Erin was impressed with colorful woven outdoor placemats, floor mats, chair cushions, and umbrellas that local artisans were weaving. Upon returning to the U.S., she was confident that U.S. consumers would be as intrigued by these accessories as she was. Erin decided to explore the possibility of starting an importing business to bring these products to the U.S. Which of the following statements seems to be good advice for Erin?

Learn from others who import goods from abroad, and particularly from Africa

The primary concerns when first starting your business are:

financing and planning

A business plan for a new business does not need to include:

the names of the prospective lending companies

Although the business plan has a great amount of detail and requires thoroughness, a well-explained business idea will come to life almost immediately in which part of this document?

the executive summary

What are the primary sources of funding for entrepreneurs?

personal savings and individual investors such as family

Management

the process used to accomplish organizational goals through planning, organizing, leading, and controlling people and other organizational resources

Planning

a management function that includes anticipating trends and determining the best strategies and tactics to achieve organizational goals and objectives

what is one major objective of planing?

to please customers

why is planning a key management function?

because accomplishing the other functions depends heavily on having a good plan

Organizing

a management function that includes designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives

Leading

creating a vision for the organization and guiding, training, coaching, and motivating others to work effectively to achieve the organization's goals and objectives

Controlling

a management function that involves establishing clear standards to determine whether or not an organization is progressing toward its goals and objectives, rewarding people for doing a good job, and taking corrective action if they are not

vision

an encompassing explanation of why the organization exists and where it's trying to head

mission statement

an outline of the fundamental purposes of an organization

what should a mission statement address?

* self-concept

* philosophy

* long-term survival needs

* customer needs

* social responsibility

* nature of the product or service

goals

broad, long-term accomplishments an organization wishes to attain

objectives

specific, short-term statements, detailing how to achieve the organization's goals

what fundamental questions does planning answer?

*What is the situation now?

*How can we get to our goal from here?

SWOT analysis

a planning tool used to strengths, weakness, opportunities, and threats

what are the 4 forms of planning?

strategic, tactical, operational, and contingency

strategic planning

the process of determining the major goals of the organization and the policies and strategies for obtaining and using resources to achieve those goals

tactical planning

the process of developing detailed, short-term statements about what is to be done, who is to do it, and how it is to be done

operational planning

the process of setting work standards and schedules necessary to implement the company's tactical objective

contingency planning

the process of preparing alternative courses of action that may be used if the primary plans don't achieve the organization's objectives

decision making

choosing among two or more alternatives

what are the 6 D's of decision making)?

1. Define the situation

2. Describe and collect needed information

3. Develop alternatives

4. Decide which alternative is best

5. Do what is indicated (being implementation)

6. Determine whether the decision was a good one, and follow up

Problem solving

the process of solving the everyday problems that occur

what are 2 types of problem solving techniques?

brainstorming & PMI

brainstorming

coming up with as many solutions to a problem as possible in a short period of time with no censoring of ideas

PMI

listing all the Pluses for a solution in one column, and the Minuses in another, and the Implication in a 3rd column

Top management

the highest level of management, consisting of the president, and other key company executives who develop strategic plans

Middle management

the level of management that includes general managers, division managers, and branch and plant managers who are responsible for tactical planning and controlling