2292 Unit 1

Sole Proprietorship:

A business owned and operated by a single individual. The owner is personally liable for all business debts and obligations.

Partnership

A business owned by two or more individuals who share the profits and losses of the business. There are two main types of partnerships: general partnerships and limited partnerships.

Corporation

A legal entity that is owned by shareholders and has a separate legal and tax existence from its owners. Corporations can issue stocks to raise capital and have limited liability protection for their shareholders.

Limited Liability Company (LLC):

A business structure that combines the liability protection of a corporation with the tax benefits of a partnership. LLCs are owned by members, and their liability is limited to the amount of their investment in the company.

Cooperative

A business owned and operated by a group of individuals for their mutual benefit. Cooperatives are often formed by farmers, credit unions, and other groups.

Franchise

A business model where a franchisee (an individual or group) purchases the right to operate a business using the trademark, products, and services of a franchisor (the owner of the business).

Nonprofit

A business organization that operates for a charitable, educational, or other public purpose. Nonprofits do not have owners or shareholders, and any profits are reinvested in the organization's mission. We will go into further details on nonprofits later in this book.

Positive Impacts of Businesses on Society

job creation, economic growth, innovation, philanthropy, necessary goods and services

Job creation:

One of the most significant positive impacts of businesses on society is job creation. Businesses provide employment opportunities, which help individuals support themselves and their families. Job creation also contributes to economic growth and reduces poverty levels.

Economic growth:

Businesses stimulate economic growth by creating new markets, developing new products, and generating revenue. This can lead to increased investment in infrastructure, improved standards of living, and higher levels of economic prosperity.

Innovation

Businesses are responsible for developing new products and services that improve people's lives. They invest in research and development, which leads to new discoveries and advances in technology. This contributes to social progress and improves people's quality of life.

Philanthropy

Some businesses give back to society through philanthropy, supporting social and environmental causes. This helps to address societal issues and improves the well-being of communities. We will talk about this in more detail later in the text.

Necessary goods and services:

Groceries, health care, energy, technology, and transportation are just some of the basic, simple examples of the ways business enables modern society.

Negative Impacts of Businesses on Society

1. environmental damage

2. exploitation of workers

3. unethical or illegal practices

4. market domination

Environmental Damage

Many businesses engage in practices that harm the environment, such as pollution, deforestation, and depletion of natural resources. These practices can have severe negative consequences for the environment, including climate change, loss of biodiversity, and water scarcity.

Exploitation of workers:

Some businesses engage in exploitative practices, such as paying low wages or providing poor working conditions. This can lead to a cycle of poverty and social inequality, and compromise the well-being of workers.

Unethical or illegal practices:

Some businesses engage in unethical or illegal practices, such as bribery, corruption, or tax evasion. These practices undermine the rule of law and harm society by distorting economic incentives and creating unfair advantages for certain businesses.

Market domination:

Some businesses dominate the market and limit competition, which can have negative consequences for consumers and smaller businesses. This can lead to higher prices, limited choice, and reduced innovation.

Economic Factors

Economic factors refer to the conditions that affect the economy in which businesses operate. These can include factors such as inflation, interest rates, and economic growth.

Interest rates

are controlled by the Federal Reserve - also known as the Fed - which is responsible for setting interest rates in the United States. Changes in interest rates can have a significant impact on businesses in several ways, including:

Cost of borrowing:

When the Fed raises interest rates, it becomes more expensive for businesses to borrow money. This can impact their ability to expand or invest in new projects, as well as their profitability.

Consumer spending:

Changes in interest rates can also impact consumer spending. Higher interest rates can lead to higher borrowing costs for consumers, which can reduce their spending power. This, in turn, can impact businesses that rely on consumer spending.

Investment

Higher interest rates can impact investment decisions made by businesses. When interest rates are high, businesses may be more likely to hold on to cash reserves rather than investing in new projects or equipment.

Currency exchange rates:

Interest rates can also impact currency exchange rates, which can have an impact on businesses that operate internationally. Changes in currency exchange rates can impact the cost of imports and exports, which can impact a company's profitability.

Inflation

is a sustained increase in the general price level of goods and services in an economy over a period of time. Inflation can have significant impacts on businesses in several ways, including:

Increased costs:

Inflation can lead to an increase in the cost of raw materials, labor, and other inputs that businesses need to produce goods and services. This can lead to a decrease in profit margins, as businesses may have to raise their prices to cover their costs.

Decreased purchasing power

Inflation can decrease the purchasing power of consumers and businesses. As prices increase, the same amount of money can buy fewer goods and services, leading to a decrease in demand for products and services.

Increased interest rates:

Inflation can lead to higher interest rates, which can increase the cost of borrowing for businesses. Higher interest rates can impact business investments and growth.

Uncertainty

Inflation can create uncertainty in the economy, making it difficult for businesses to plan and make long-term investments. Inflation can also create unpredictability in financial markets, which can impact businesses that rely on investments.

Wage demands:

Inflation can lead to higher wage demands from employees. As the cost of living increases, employees may demand higher wages to maintain their standard of living. This can lead to higher labor costs for businesses.

Legal Factors:

Legal factors refer to the laws and regulations that govern business operations. These laws and regulations can impact businesses' operations, such as the types of products and services that they can offer, the way they can market those products and services, and how they must treat employees and customers.

Social Factors:

Social factors refer to the social and cultural trends that can impact businesses' operations. These can include factors such as demographic trends, cultural attitudes, and consumer behavior. For example, changes in consumer preferences or shifts in demographic trends can impact the demand for certain products or services.

Technological Factors:

Technological factors refer to advances in technology that can create new opportunities and challenges for businesses. These can include factors such as the development of new products, new communication and distribution channels, and changes in the way consumers access information and make purchasing decisions.

Finance and Accounting:

This functional area manages the financial aspects of the business, including financial planning, budgeting, accounting, financial reporting, and managing cash flow.

Marketing and Sales:

The marketing and sales function is responsible for promoting and selling the company's products or services. This includes market research, advertising, branding, pricing, product development, and managing customer relationships.

Operations and Production

The operations and production function is responsible for managing the production and delivery of goods or services. It includes activities such as production planning, inventory management, quality control, supply chain management, and logistics.

Human Resources:

The human resources function is responsible for managing the company's employees. This includes activities such as recruitment, hiring, training and development, performance management, compensation and benefits, and employee relations.

Information Technology

The information technology function manages the company's technology infrastructure and systems. This includes hardware and software management, data security, network management, and supporting technology needs across the organization.

Research and Development:

The research and development function focuses on creating and improving products, services, or processes through research, experimentation, and innovation. This includes activities such as product design, prototyping, testing, and staying abreast of industry trends.

Legal and Compliance:

The legal and compliance function ensures that the company operates within the legal framework and complies with relevant laws and regulations. It involves managing legal risks, drafting and reviewing contracts, and ensuring ethical and legal business practices.

Corporate Strategy and Planning:

This function is responsible for setting the overall strategic direction of the company, developing long-term plans, and evaluating new business opportunities. It involves strategic analysis, market research, competitive intelligence, and strategic decision-making.

Technological Advancements:

Leaders need to stay abreast of emerging technologies and understand their potential impact on the business. This includes topics such as artificial intelligence, automation, Internet of Things (IoT), blockchain, and data analytics. Understanding how these technologies can disrupt existing business models and create new opportunities is crucial for future success.

Digital Transformation

Digital transformation involves integrating digital technologies into all areas of a business to improve operations, enhance customer experience, and drive innovation. Leaders need to consider how digital technologies can transform their business processes, customer engagement, and overall business strategy.

Sustainability and Environmental Impact

As sustainability becomes increasingly important, leaders need to consider how their business can operate in an environmentally responsible manner. This includes topics such as reducing carbon footprint, adopting renewable energy sources, implementing circular economy practices, and addressing social and ethical considerations.

Changing Workforce Dynamics:

The workforce is evolving, with new generations entering the workforce and remote and flexible work arrangements becoming more prevalent. As many as 10,000 baby boomers are retiring every single day! This opens opportunities for those coming behind them. Leaders need to consider topics such as talent acquisition and retention, diversity and inclusion, upskilling and reskilling, and fostering a culture that supports collaboration and innovation.

Globalization and International Markets:

With increasing globalization, leaders need to consider expanding into international markets, understanding global trends, and navigating cross-cultural differences. International conflict among and between nations is an area that leaders will have to navigate if they want to compete on a global stage. Topics such as global supply chains, trade policies, geopolitical risks, and international partnerships need to be considered for business growth and resilience.

Customer Experience and Personalization:

Customer expectations are continuously evolving, with a focus on personalized experiences and convenience. Leaders need to consider topics such as customer-centricity, leveraging customer data for insights, enhancing digital customer experiences, and providing personalized and tailored offerings

Ethical and Social Responsibility:

Consumers are increasingly conscious of companies' ethical practices and social impact. Leaders need to consider topics such as corporate social responsibility, ethical sourcing, transparency, and building trust with customers and stakeholders.

Disruption and Agility:

Rapid technological advancements and changing market dynamics can lead to disruption in industries. Leaders need to foster a culture of innovation, embrace agile practices, and be open to change. Topics such as identifying potential disruptors, adapting to market trends, and exploring new business models should be on their radar.

Utilitarianism:

A utilitarian approach suggests that decisions should be evaluated based on the maximization of overall utility for the greatest number of people. Under this framework, the decision-maker would consider the consequences of weighing the benefits and harms for the various stakeholders who are impacted by the decision.

Deontology

A deontological approach focuses on the action as opposed to the outcome. This approach emphasizes the importance of adhering to universal principles and moral duties, regardless of the consequences. Decisions using this framework are guided by rules and obligations that are considered morally right.

Virtue

A virtue ethics approach emphasizes the development of moral character. This framework focuses on an individual embodying virtues rather than specific actions or outcomes. Many companies espouse the virtues they feel are most important through their stated values. The expectation is that employees will make decisions based on those values.

Confirmation bias

Seeking out information that confirms preexisting beliefs or assumptions.

Example: A manager who feels strongly that their new customer attraction strategy will be successful only seeks out and interprets data and feedback that aligns with their belief, often dismissing and ignoring information that challenges their belief.

Anchoring Bias

Overreliance on the initial set of information that was provided when making a judgment or decision, even if that initial set of information was not the most important or accurate.

Example: A hiring manager makes a preliminary job offer to a candidate for a low salary and finds it challenging to deviate from that amount even after they learn the candidate's qualifications warrant the increase.

availability bias

Putting more emphasis on information and examples that are readily available as opposed to considering a broader range of information.

Example: When developing their employee retention strategy, a business leader focuses on exit interview data from previous employees that accounted for 10 percent of departures in the past five years, as opposed to seeking out information on why the other 90 percent left the organization.

Halo Effect

Developing a positive impression of someone based on a single positive characteristic or experience, leading to an overgeneralization of their abilities.

Example: An employee delivered exceptional results on a signature project, resulting in major savings for the organization. The person's manager now views them as an overall excellent performer despite the same employee making several mistakes on other projects.

Sterotyping

Involves generalizing beliefs about an individual based on their membership in a particular group of people.

Example: A manager makes an assumption that all employees from a particular country are not proficient in English and assigns them less client-facing roles based solely on their country of origin.

Gender Bias

Providing differential treatment based on an individual's gender.

Example: A female employee is repeatedly passed over for promotions despite being better qualified than her male counterparts, due to an assumption that women are not suited to leadership roles.

Racial and ethnic bias

Holding prejudices against individuals or groups based on their race or ethnicity.

Example: A job applicant from a minority background was overlooked for a job opportunity and a less qualified candidate was selected from the majority group based on assumptions about the applicant's capabilities.

Age Bias

Holding preconceived notions about a person based on the individual's age.

Example: A 72-year-old employee's suggestions related to the adoption of new technology was dismissed by younger colleagues because they assumed that older individuals are less tech-savvy.

LGBTQ+ bias

Holding prejudices against individuals who identify as lesbian, gay, bisexual, transgender, or queer.

Example: A lesbian employee is excluded from company meetings and events, resulting in a hostile work environment that hampers their ability to contribute fully and feel supported in the workplace.

Situation Bias

When you experience anxiety based on the physical environment in which you are presenting

Audiance Based

Some presenters struggle more with smaller audiences than larger ones; some presenters struggle with a more senior audience versus presenting in front of their peers; etc.

Goal-Based

When you experience anxiety based on what is at stake as a result of the presentation (getting a bad grade, not getting the promotion, etc.)

Sandwich Method

A feedback technique where the giver starts and ends with positive comments while placing constructive feedback and areas for improvement in the middle.

Blind Spots

Aspects of performance or behavior that an individual is unaware of until revealed through constructive feedback.

Four essential principles for giving effective feedback

1. Be specific\n2. Be timely\n3. Use the sandwich method\n4. Embed it into the culture

Three essential principles for receiving feedback

1. Assume positive intent\n2. Take an active listening approach\n3. Internalize and reflect

Active Listening Approach (in receiving feedback)

Giving full attention, maintaining eye contact, asking clarifying questions, and parroting information back to ensure complete understanding.

Best approach when feedback is emotional in nature

Wait until tensions have calmed and deliver the feedback privately rather than in front of a group.

Forming Stage

The initial stage of team development characterized by uncertainty, high reliance on a leader, ice-breaking, and building foundational relationships and goals.

Storming Stage

The stage of group development characterized by conflict, power struggles, and disagreements over individual roles, timelines, and resource allocation.

Norming Stage

The stage of group development where norms, expectations, and clear communication channels are established, enabling effective collaboration and division of duties.

Performing Stage

The stage of team development marked by high productivity, synergy, complete alignment on overarching goals, and healthy, productively managed conflict.

Adjourning Stage

The final stage of Tuckman's model, added a decade after the original model, involving task completion, performance reflection, and recognition of contributions.

Primary goal of Tuckman's Model

To diagnose where a team is in its life cycle and determine strategies to help it transition smoothly to the performing stage.

Impact of adding a new member to a performing team

Causes the team to revert back to the forming stage to properly onboard and integrate the new member.

Project Aristotle

A study conducted by Google researchers that evaluated over 250 attributes across teams to determine what drives effectiveness, concluding that how team members interact matters more than who is on the team.

Psychological Safety

A shared belief that a team environment is safe for interpersonal risk-taking, allowing members to express opinions and be vulnerable without fear of negative consequences.

Dependability (in team dynamics)

The team dynamic where members consistently fulfill commitments with high-quality output on time, allowing peers to focus on their own responsibilities.

Structure and Clarity (in team dynamics)

The team dynamic characterized by explicit understanding of individual roles, specific goals, and execution timelines across all team members.

Meaning of Work (in team dynamics)

The team dynamic where individual members feel that their assigned tasks are personally important and aligned with their core values.

Impact of Work (in team dynamics)

The team dynamic where members fundamentally believe that their contributions create tangible results that advance a larger cause or organizational objective.

Five key dynamics of effective teams identified by Project Aristotle

1. Psychological safety

2. Dependability

3. Structure and clarity

4. Meaning of work

5. Impact of work

Researcher who introduced the concept of psychological safety as a team's shared belief that it is safe for interpersonal risk-taking

Dr. Amy Edmondson

Negotiation

A process in which two or more parties communicate and discuss to reach a mutually acceptable agreement or solution to a problem.

Distributive Negotiation

A competitive, zero-sum negotiation approach focused on claiming as much value as possible from a fixed pool of resources.

Integrative Negotiation

A collaborative, win-win negotiation approach focused on creating value and expanding the available pool of resources to meet both parties' needs.

Congruent Negotiation

A negotiation approach where all involved parties share identical goals and desired outcomes from the outset.

Key distinction between integrative and congruent negotiations

In congruent negotiations, parties seek the exact same outcome, whereas in integrative negotiations, parties seek different but complementary outcomes.

Four situational factors that determine the negotiation approach

1. Context of the negotiation 2. Relationship between the parties 3. Power dynamic between the parties 4. Preferences and objectives of the parties

Preperation

The first step in the negotiation process is preparation. This involves identifying the parties involved, their interests, and the issues to be negotiated. It also involves researching the other party's position, strengths, weaknesses, and preferences.

Discussion

The second step is discussion. This involves the parties exchanging information and views on the issues to be negotiated. This is an opportunity to clarify misunderstandings, identify common ground, and explore potential areas of agreement.

Propsals

The third step is the proposal stage. This involves the parties making offers and counteroffers to try to find a mutually acceptable solution. This stage may involve exploring creative solutions and making trade-offs to achieve a mutually beneficial agreement.

Bargaining

The fourth step is bargaining. This involves the parties negotiating the terms of the agreement and trying to find a compromise that meets their respective interests. This stage may involve making concessions or compromising on certain issues to achieve an agreement.

Closure

The final step is closure. This involves finalizing the terms of the agreement and documenting the agreement in a formal contract. This stage may also involve implementing and monitoring the agreement to ensure compliance.

Reservation Price

the lowest price a seller will accept for an item in an auction

aspirational price

Aspirational pricing is a strategy where sellers list a property or asset above current market value based on hope, emotion, or a desire to test the absolute ceiling of what a buyer might

BATNA

• BATNA stands for "Best alternative to a negotiated agreement." This is the fallback option you have if the negotiation fails. Having a strong BATNA gives you more leverage during the negotiation. Understand the other party’s BATNA as well.

  • An example of a BATNA is as follows: After graduation, you receive two job offers from different companies. If you are unable to negotiate a higher salary with either company, your BATNA would be to accept the job offer with the higher salary, or to continue your job search and look for other job opportunities. By having a strong BATNA, you are in a better negotiating position, as you have an alternative option if the negotiations do not work ou