Small Business Management

C. Amato - Pitt

Sole Proprietorship

A business owned and operated by one individual

• most common form

• has unlimited liability

Partnership

a form of business organization defined by the Uniform Partnership Act as an association of two or more persons who carry on as co-owners of a business for profit

Corporation

a legal entity, created by the state, whose assets and liabilities are separate from its owners ( AKA limited liability)

C Corporation

A corporation taxed separately from owners; subject to double taxation

S Corporation

a corporation taxed as though it were a partnership with restrictions on shareholders

(A corporation where profits pass through to owners and are taxed once)

LLC (Limited Liability Company)

form of ownership that provides limited liability and taxation like a partnership but places fewer restrictions on members

(A business structure with limited liability and flexible taxation)

Unlimited Liability

Owners are personally responsible for all business debts

Limited Liability

Owners are only liable up to the amount they invested

Public Corporation

A corporation whose stock is traded publicly

Private Corporation

A corporation owned by a small group and not publicly traded

Entrepeneur

A person who risks time, money, and effort to develop for profit an innovative product or way of doing something

Small Business

Independently owned business with fewer than 500 employees that is not dominant in its competitive area

Franchise

A license to sell another company’s products or use its brand

Franchisee

The buyer/operator of a franchise

Franchiser

The company that sells the franchise

Equity Financing

When a business raises money by selling ownership in a company

Debt Financing

Borrowing money that must be repaid over time

Venture Capital

Investment in new or early-stage businesses (startups) in exchange for partial ownership

Business Plan

a precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals

Bartering

Trading goods/services without money

Management

process of achieving organizational goals by using its resources effectively and efficiently in a changing environment

Efficiency

Using minimum resourcees

Effectiveness

Achieving intended results

Planning

Setting objectives and deciding how to achieve them

Organizing

Structuring resources and tasks to accomplish objectives in an efficient manner

Leading (Directing)

Motivating and guiding employees to achieve objectives in an efficient manner

Controlling

Evaluating performance and correcting actions/activities to keep the organization on course

Top Management

Executives responsible for overall organization

Middle Management

Implements strategies

Front-line Management

Supervises daily operations

Technical Skills

the specialized knowledge and training needed to perform jobs related to particular areas of management

Human Relations Skills

the ability to deal with people both inside and outside the organization

Conceptual Skills

the ability to think in abstract terms and to see how parts fit together to form the whole

Analytical Skills

the ability to identify relevant issues, recognize their importance, understand relationships, and perceive underlying causes

SWOT Analysis

Evaluates Strengths, Weaknesses, Opportunities, and Threats

TOWS

Uses SWOT to create strategies

*rearranged version of SWOT (it’s just applying SWOT)

ex) how do we use our strengths to take advantage of opportunities and defend against threats

BCG Matrix (Boston Consulting Group Matrix)

Classifies products by market share and growth

functions of SWOT vs TOWS vs BCG

SWOT: diagnose

TOWS: strategize

BCG: invest decisions

Needs Improvement Analysis

general evaluation of performance gaps

Goal-Setting Inventory

Tool to define and track goals

Functional Departmentalization

Groups jobs by function

Product Departmentalization

Organized by product lines

Geographic Departmentalization

organized by geographic location

Customer Departmentalization

arrangement of jobs around the needs of various types of customers

Centralized Organization

a structure in which authority is concentrated at the top

Decentralized Organization

an organization in which decision-making authority is delegated to lower levels

Span of Management

Number of employees a manager supervises

Tall Organization

Many layers of management

Flat Organization

Few layers of management

Motivation

internal drive that directs a person’s behavior toward goals

Morale

Employee attitude toward job, employer, and/or colleagues

Intrinsic Reward

Internal Satisfaction after attaining a goal

Extrinsic Reward

External rewards received from someone else(money, recognition)

Maslow’s Hierarchy

Needs: physiological —> safety —> social —> esteem —> self-actualization

*hierarchy pyramid works bottom to up!

Hygiene Factors

Work Conditions (pay, safety)

Theory X

Workers dislike work

Theory Y

Workers enjoy work

Theory Z

Emphasizes participation

Equity Theory

Fairness affects motivation

Expectancy Theory

Motivation depends on expected outcome

Goal-Setting Theory

Goals improve performance

Job Analysis

the determination, through observation and study, of pertinent information about a job

Recruiting

forming a pool of qualified applicants from which management can select employees

Selection

Choosing employees

Training

Teaching job skills

Development

Improving long-term skills

Turnover

Employees Leaving

Collective Bargaining

Negotiation between unions and management

Profit Sharing

Employees receive portion of profits

Marketing

a group of activities designed to expedite transactions by creating, distributing, pricing, and promoting goods, services, and ideas

Market Segmentation

a strategy whereby a firm divides the total market into groups of people who have relatively similar product needs

Stock

shares of a corporation that may be bought or sold

Cooperative (Co-op)

an organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization

S Corporation

a corporation taxed as though it were a partnership with restrictions on shareholders

Mission Statement

A statement of an organization’s fundamental purpose and basic philosophy

Objective

the end results desired by an organization

Departmentalization

the grouping of jobs into working units usually called departments, units, groups, or divisions

market segmentation vs departmentalization

• Market Segmentation = organizing CUSTOMERS

• Departmentalization = organizing EMPLOYEES

Primary Data

marketing information that is observed, recorded, or collected directly from respondents

Secondary Data

information compiled inside or outside an organization for purposes other than the current situation

Target Market

specific group a company focuses on

4 P’s

Product, Price, Promotion, Place

Porter’s 5 Forces

the five fundamental competitive pressures that determine an industry’s long-term profitability

List Porter’s 5 Forces

1. Bargaining Power of Suppliers

   • How much control suppliers have over price/inputs

2. Threat of Substitute Products or Services

   • Can customers switch to something else easily?

3. Threat of New Entrants

   • How easy is it for new competitors to enter the market?

4. Bargaining Power of Buyers

   • How much power customers have to demand lower prices

5. Rivalry Among Existing Competitors ⭐ (most important)

   • Level of competition between current firms

What are Porter’s 5 forces helpful in determining?

• determine how competitive an industry is

• determine how profitable a business can be

Forces

the competitive pressures that shape profitability

Factors

the conditions that influence how strong each force is

Vertical Integration

when a company expands along its supply chain

Horizontal Integration

When a company expands by merging with competitors at the same stage

what are the 5 important questions when determining “Strategy”?

1. Who

2. What

3. When

4. Where

5. Why

Psychographic in Marketing

Why customers buy

Demographic in Marketing

who customers are

Geographic in Marketing

Where customers are located

Behavioral in Marketing

how customers act

Market Validation

proof you selected the correct target market

Operations Management

activities involved in transforming resources into goods and services

Inputs

resources such as labor, money, materials, energy

Outputs

goods, services, or ideas produced

Supply Chain Management

connecting and integrating all parties in distribution to satisfy customers

Bottleneck

a constraint that slows down a process (important in supply chain)