Business Unit 2 Exam: Ch 5-8

Types of Business Ownership (8)

1. Sole Proprietorship

2. Partnership

3. General Partnership

4. Limited Partnership

5. Limited Liability Partnership (LLP)

6. Corporation

7. S Corporation

8. Limited Liability Company (LLC)

Sole Proprietorship

A business that is owned & usually managed by one person

Partnership

Legal form of business with two or more owners

General Partnership

All owners share in operating the business & assuming liability for business’s debt

Limited Partnership

One or more general partners & one or more limited partners

Limited Liability Partnership (LLP)

Limits partner’s risk of losing personal assets to only their own faults of people under their supervision

Corporation

Legal entity with authority to act & have liability separate from its owners

S Corporation

Unique gov creation that looks lke a corp but is taxed like sole prop & partnerships (avoids double taxation)

Limited Liability Company (LLC)

Company similar to S corp but w/o special eligibility reqs.

Franchise

Right to use specific business’s name & sell it’s products or services in given territory

Cooperative (Co-op)

Business owned & controlled by people who use it (producers, consumers or workers with similar needs who pool resources for mutual gain)

Entrepreneur

Person who accepts risk of starting & running a business

Enterprise Zones

Specif. gov areas to which gov tries to attract priv. busin. investment by offering lower taxes & other gov support

Incubators

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

Small Business Administration (SBA)

US Gov Agency that advises & assists small busin. by providing management training & financial advice/loans

Small Business Development Centers (SBDC)

Local orgs that help entrepreneur evaulate feasibility of one’s ideas, develop bus plan for low cost

Business Plan

Detailed written statement that describes overview and plan for all aspects of the business

Executive Summary

Short management summary of the proposed venture

Venture Capitalists

Indiv. or companies that invest in new bus. in exchange for partial ownership or those businesses.

Angel Investors

Private indiv. who invest their own $ in potentially hot new companies before they go public.

Crowdfunding & ex (2)

• Online where people who want money & those willing to donate/invest

• Ex: GoFundMe

Small Business Impact on Jobs

Create approx. 2/3 of new jobs in US

Small Business on Innovation

Account for more than 44% of GDP

Small Business on Customer Service

More personal Customer Service & ability to respond quickly to opportunities

Planning

Anticipates trends & determines best strategies & tactics to reach your goals

Organizing

Creating conditions in which everyone & everything work together to achieve goals

Leading

Creating vision in motivating others to achieve org’s goals & obj. in timely manner

Controlling

Est. clear standards to determine whether org is moving towards goal or needs corrective action

Types of Planning (4)

• Strategic

• Tactical

• Operational

• Contingency

Strategic Planning

Determine goals & policies to meet goals (overall picture of strategy)

Tactical Planning

Determine goals & policies to meet goals (overall picture of strategy)

Operational Planning

Setting work standards & schedules to implement tactical objectives

Contingency Planning

Preparing all courses of action if primary plans fail

Crisis Plan & ex (2)

Major issue with business that will undermine objectives (When contingency plan goes wrong)

ex: inaccurate horse power ratings, potentially get sued

Leadership Styles (3)

• Autocratic

• Participative (Democratic)

• Free-Rein

Autocratic Leadership

Decisions made w/o consulting others

Participative (Democratic) Leadership

Decisions made with consulting together

Free-Rein Leadership

Free to do what it takes

Decision Making

Choosing among two or more alternatives

Rational Decision-Making Model

Step-by-step logical process to pick absolute best choice by relying on facts of data instead of emotions

Problem Solving

Solving everyday problems

Brainstorming

Coming up with as many solutions to a problem as possible

Organizational Chart

Chart that shows who is accountable for completion of specific work & who reports to whom

Centralized Authority

Decision-making authority is maintained at top level (CEO) of management at company’s hq

Decentralized Authority (2)

• Authority delegated to lower-level managers more familiar w local conditions that headquarters management could be

• Not just CEO makes decisions

Span of Control

Optimum # of people you work for (how many people you’re responsible for)

Tall Organization Structure (2)

• MANY levels of management

• LESS span of control

Flat Organization Structure (2)

• FEW layers of management

• BROAD span of control

Departmentalization

Dividing of org functions into separate units

By function

People group by process

By product

People who work on that (same) product group together

By Customer Group

Group by same customer you serve

By Geographic Location

Specific geo areas group together

Line Organization

Direct two-way lines of communication & authority, with all people reporting to only ONE supervisor

Line-and-Staff Organization

Workers moving towards goals & support staff (janitors, security, HR)

Line workers vs Staff workers (2)

• Line: Actively contribute to goals

• Staff: Support roles (don’t make $ for company)

Matrix Organization

Organized by function & project they’re on

Cross-Functional Teams & ex (3)

• Top people from all diff areas come together for project then disband & move on

• Ex: Heads of Marketing, Sales & Production come together)

• Usually self managed team

Networking

Est & weaving strong relationships between key managers in own & other organizations

Virtual Corporation

Temporary networked org made up of replaceable firms that join & leave as needed

Restructuring

Redesigning an org. so it can more effectively & efficiently serve its customers

Inverted Organizations

Has contact people at TOP & chief executive officer @ BOTTOM of org chart

Organizational Culture

Widely shared values within an org. that provide unity & cooperation to achieve common goals.

Top Manager: Tech, HR, Conceptual skills amount emphasis

More conceptual, middle HR, less tech skills

Middle Manager: Tech, HR, Conceptual skills amount emphasis

Equal amounts of all

First-line employees: tech skills, HR, Conceptual amount emphasis

More tech skills, then HR, and little conceptual skills

Controlling & 6 examples

Provide feedback & adj from any deviation from plan

1. Performance standards

2. Monitoring

3. Comparing Results

4. Corrective Action

5. Communicate results

6. Take corrective action

Sole Proprietor (Owned by 1), Pros (5)

1. Be own boss

2. Easy to start and end

3. Leaves legacy

4. Retain profits

5. No special taxes

Partnership (Owned by 2+ owners), Pros (3)

1. Longer survival

2. More financial resources

3. Shared management knowledge

Corporation (Legal entity w authority to act), Pros (6)

1. Limited liability

2. Ability to raise $

3. Size

4. Perpetual life

5. Easy to change owners

6. Easy to draw talent

Sole Proprietor Cons (5)

1. Unlimited liability

2. Limited financial resources

3. Overwhelming time commitment

4. Few fringe benefits

5. Limited life span

Partnership Cons (4)

1. Unlimited liability

2. Division of profits

3. Disagreements

4. Difficult to terminate

Corporation Cons (5)

1. Initial cost

2. Extensive paperwork

3. Double taxation/ 2 returns

4. Difficult to terminate

5. Conflict w shareholders

Top Manager positions (2)

• President

• Vice President

Middle Manager positions (3)

• Plant Manager

• Division Head

• Branch Manager

Supervisory (First-Line) positions (4)

• Supervisors

• Foremen

• Dept heads

• Section leaders

Nonsupervisory position

Employees

Departmentalization vs Division of Labor (2)

Departmentalization: Grouping separate jobs to administrative units

Division of Labor: Breaking complex jobs into individual tasks

Limited liability partner role

Passive investor w liability capped at financial contribution

4 Restrictions of S Corp

1. Domestic entity (must be organized in US)

2. Shareholder limit (no more than 100)

3. Shareholders must be US citizens

4. Limit to ONE class of stock (every share has same financial rights)

Limited Liability Companies

Protect owner’s personal assets from business debts & lawsuits (ex: Google LLC, Youtube LLC)

Merger

Result of two firms forming one company

Acquisition

When one company buys & absorbs the other

3 types of Mergers

1. Horizontal

2. Vertical

3. Conglomerate

Horizontal Merger

Combines direct competitors

Vertical Merger

Combine companies at different stages in supply chain

Conglomerate Merger

Combine business in completely unrelated industries

Mergers allow a company to

expand within their field or enter new markets

Leveraged buyout (LBO)

Acquiring company using small amount of personal $ & large amount of borrowed debt

Why do people take risk to start a business?

Independence & opportunity in market

What does it take to be an entrepreneur? (4)

• Action oriented

• Capital

• Responsibility

• Problem-solving skills

Intrapreneur & what they strive to do

Works inside established company & develops innovative ideas

Entrepreneurial teams

Create, own & manage new business ventures

Why small businesses don’t enter the global market

Limited capital, harsh regulation rules, etc

After personal savings, entrepreneurs go to (3)

• Family & Friends

• Banks

• Crowdfunding

SWOT Analysis (4)

• Strengths

• Weaknesses

• Opportunities

• Threats

Technical Skills

Hands-on abilities

Human Relations skills

Social skills

Conceptual skills

Strategic problem solving skills, see the big picture

Mission

What company does TODAY to fulfill org’s purpose/goals