Business Exam 2

Communication

The transmission of information between a sender and a recipient

What does communication include?

• Listening

• Seeking and understanding feedback from one's audience and responding appropriately

Noise

Any interference that causes the message you send to be different from the message your audience understands

Communication barriers

Obstacles to effective communication, typically defined in terms of physical, language, body language, cultural, perceptual, and organizational barriers

Intercultural communication

Communication among people with differing cultural backgrounds

Communication barrier examples

• Body Language

• Language

• Noise 

• Culture - words and terms 

• Physical

• Perceptual

• Organizational

Nonverbal communication

Communication that does not use words

Nonverbal Communication examples

• Eye contact

• Tone of voice

• Facial expressions

• Gesture/posture

Eye contact does what?

Indicates integrity, trust, and respectful attention

Tone of voice does what? 

May indicate mood and contribute to effectiveness through variation

Gesture/posture does what?

Conveys the level of authority, confidence, and coherence

Facial expression does what?

Conveys various emotions, level of agreement, as well as comprehension

Active Listening

Attentive listening that occurs when the listener focuses their complete attention on the speaker

Listening Dos?

• Use your extra mental capacity to summarize

• Take notes

• Listen with both your ears and your eyes

• Use nonverbal communication

• Use verbal feedback and questions to indicate understanding and empath

Listening Don’ts

• Don’t even glance at your emails or text messages

• Don’t begin speaking the moment the person stops talking

• Don’t get overly comfortable

• Don’t pick up your phone—or even look at your phone

• Don’t interrupt or finish other people’s sentences

Communication channels

The various ways in which a message can be sent, ranging from one-on-one in-person meetings to internet message boards

Understanding the impact of each communication channel helps to what?

Determine the best channel to use

How do communication channels differ from each other

How much information they communicate to the recipient

When should communication channels be determined?

After analyzing and considering the audience

Types of communication channels

• Texting

• Memos/reports

• Email

• Voice mail

• Telephone conversation

• Video-conferencing

• In-person presentation

• Face-to-face meeting

When did videoconferencing become a primary communication channel?

when the workforce pivoted to remote work because of the COVID-19 pandemic

Best videoconferencing practices?

• Keep the video camera on to build trust and a personal connection

• Mute audio when not speaking

• Use distraction-free backgrounds; no filters or frames

• Keep eyes on the camera; place a light in front of you

• Avoid multitasking

• Wear office attire; personal grooming

Bias

A preconception about members of a particular group. Common forms of bias include gender bias; age bias; and race, ethnicity, or nationality bias

Gender bias

• Consists of words that suggest stereotypical attitudes toward a specific gender

• If you don’t know gender, use a proper name (or noun) or convert pronouns to plural

Age bias

American culture associates youth with highly valued qualities such as creativity, speed, independence, and individualism

Race, ethnicity, and nationality bias

Sometimes stems from unarticulated assumptions about a person’s attitudes, opinions, and experiences

Active voice

Sentence construction in which the subject performs the action expressed by the verb (e.g., The accountant did the taxes.). The active voice works better for the vast majority of business communication

Passive voice

Sentence construction in which the subject does not do the action expressed by the verb; rather, the subject is acted upon (e.g., The taxes were done by our accountant.). The passive voice tends to be less effective for business communication

Dynamic delivery

Vibrant, compelling presentation delivery style that grabs and holds the attention of the audience

Sole proprietorship

A form of business ownership with a single owner who usually actively manages the company

Sole proprietorship downsides

• Company earnings treated as owner’s income

• Company debts are the owner’s personal responsibility

Unlimited liability

When businesses formed as sole proprietorships or business partnerships cannot pay their bills, all or part of the business owner’s personal financial assets, such as cash, bank accounts, investments, or homes, can be seized to pay the business debts

Partnership

A voluntary agreement under which two or more people act as co-owners of a business for profit

Partnership benefits

• You bring different types of people to the table

• tax return still needs to be filled out, but the company itself doesn’t get taxed; the shareholders do (tax form is for information purposes)

General partnership

A partnership in which all partners can take an active
role in managing the business, and have unlimited liability for any claims against the firm

Corporation

A form of business ownership in which the business is
considered a legal entity that is separate and distinct from its owners (looked at like a person, it is its own thing)

Articles of incorporation

The document filed with a state government to
establish the existence of a new corporation

Limited liability

When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected

Limited liability company (LLC)

A form of business ownership that offers
both limited liability to its owners and flexible tax treatment (Middle of the road)

LLC Facts

• Relatively new form of business ownership

• LLC owners can elect to have their business taxed either as a corporation or
  a partnership

• can have one owner or multiple owners

• limits liability

Advantages of a sole proprietorship

• Ease of formation

• Retention of control

• Pride of ownership

• Retention of profits

• Possible tax advantage

Disadvantages of a sole proprietorship

• Limited financial resources

• Unlimited liability

• Limited ability to attract and maintain talented employees

• Heavy workload and responsibilities

• Lack of permanence

Formation of General Partnerships

• No limit on the number of partners

• Partnership agreement should entail details regarding:
  − Initial financial contributions
  − Specific duties and responsibilities
  − Sharing profits (and losses)
  − Settling disagreements
  − Death or withdrawal of a partner

Partnership Advantages

• Ability to pool financial resources

• Ability to share responsibilities and capitalize on complementary skills

• Ease of formation

• Possible tax advantages

Partnership Disadvantages

• Unlimited liability

• Potential for disagreements

• Lack of continuity

• Difficulty in withdrawing from a partnership

Limited partnership

A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability

Limited liability partnership (LLP)

All partners have the right to participate in the management has limited liability for company debts

C corporation

The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

Corporate bylaws

The basic rules governing how a corporation is organized and how it conducts its business

• Requirements vary by state

Stockholder

An owner of a corporation

Institutional investor

An organization that pools contributions from investors, clients, or depositors, and uses these funds to buy stocks and other securities

Ownership of C Corporations

• Ownership is represented by shares of stock
  - Stock for large corporations is usually publicly traded
  − Small businesses can have as few as one shareholder

Board of directors

The individuals who are elected by the stockholders of a corporation to represent their interests

• Establishes the corporation’s mission and sets its broad objectives

• Appoints officers, such as the CEO and the CFO, for the day-to-day management of the
  corporation

C Corporation Advantages

• Limited liability

• Permanence

• Ease of transfer of ownership

• Ability to raise financial capital

• Ability to make use of specialized management

C Corporation Disadvantages

• Expense and complexity of formation and operation

• Complications when operating in multiple states

• Double taxation of earnings and additional taxes

• More paperwork and regulation and less secrecy

• Possible conflicts of interest

S corporation

A form of corporation that avoids double taxation by having its income taxed as if it were a partnership

Statutory close (or closed) corporation

A corporation with a limited number of owners that operate under simpler, less formal rules than a C corporation

Nonprofit corporation

A corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations

S Corporation Key Advantages

• The IRS does not tax the earnings of S Corporations separately. Earnings pass through the company and are taxed only as income to stockholders, thus avoiding the problem of double taxation associated with C Corporations.

• Stockholders have limited liability

S Corporation limitations

• It can have no more than 100 stockholders.

• With only rare exceptions, each stockholder must be a U.S. citizen or permanent resident of the United States (no ownership by foreigners or other corporations).

Statutory Close (or Closed) Corporation key advantages

• Operate under simpler arrangements than conventional corporations. For example, they don’t have to elect a board of directors or hold an annual stockholders’ meeting.

• All owners can actively participate in management while still having limited liability

Statutory Close (or Closed) Corporation limitations

• The number of stockholders varies among states but is usually no more than 50

• Stockholders normally can’t sell their shares to the public without first offering the shares to existing owners.

• Not all states allow the formation of this type of corporation.

Nonprofit Corporation Key Advantages

• Earnings are exempt from federal and state income taxes.

• Members and directors have limited liability.

• Individuals who contribute money or property to the nonprofit can take a tax deduction, making it easier for these organizations to raise funds from donations

Nonprofit Corporation limitations

• It has members (who may pay dues) but cannot have stockholders

• It cannot distribute dividends to members.

• It cannot contribute funds to a political campaign.

• It must keep accurate records and file paperwork to document tax-exempt status.

Acquisition

A corporate restructuring in which one firm buys another

Merger

A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization

Horizontal merger

A combination of two firms that are in the same industry (buying out compition)

Vertical merger

A combination of firms at different stages in the production of a good or service

Conglomerate merger

A combination of two firms that are in unrelated industries

Divestiture

The transfer of total or partial ownership of some of a firm‘s operations to investors or to another company

• Gets rid of a part of the company that no longer fits strategic plans

• A “spinoff” occurs when a company issues stock in one of its own operating units and sets it up as a separate company

• In a “carve-out,” the firm converts a particular unit or division into a separate company and issues stock in the newly created corporation to sell to outside investors

Forming and Managing an LLC

Created by filing a document and paying filing fees in the state where the business is organized

• Organizers draft an operating agreement, which is similar to the bylaws of a
  corporation

• State laws differ in their requirements

• LLCs are neither partnerships nor corporations

• Owners are known as members rather than stockholders or partners

LLC Advantages

• Limited liability

• Tax pass-through

• Simplicity and flexibility in management and operation

• Flexible ownership

LLC Disadvantages

• Complexity of formation

• Annual franchise tax

• Foreign status in other states

• Limits on firms that can form LLCs

• Differences in state laws

Franchise

A licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations

Franchisor

The business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations

Franchisee

The party in a franchise relationship that pays for the right to use resources supplied by the franchisor

Distributorship

A type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

Business format franchise

A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor

Franchising Advantages

• Less risk

• Training and support

• Brand recognition

• Easier access to funding

Franchising Disadvantages

• Costs

• Lack of control

• Negative halo effect

• Growth challenges

• Restrictions on sale

• Poor execution

Franchise agreement

The contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties

Franchise Disclosure Document (FDD)

A detailed description of all aspects of a franchise that the franchisor must provide to the franchisee at least 14 calendar days before the franchise agreement is signed

Key terms in a franchise agreement

• Terms and conditions

• Fees and other payments

• Training and support

• Specific operational requirements

• Conflict resolution

• Assigned territory 

Reasons to launch a small business

• Greater financial success

• Independence

• Flexibility

• Challenge

• Survival

Entrepreneurs

People who risk their time, money, and other resources to start and manage a business

The Entrepreneurial Mindset

• Entrepreneurs aim to change the world through goods or services

• Hope to better themselves, but most do not expect huge, transformative growth

Entrepreneurial Characteristics

• Vision

• Self-reliance

• Energy

• Confidence

• Tolerance of uncertainty

• Tolerance of failure

Internal locus of control

A deep-seated sense that the individual is personally responsible for what happens in their life

External locus of control

A deep-seated sense that forces other than the individual are responsible for what happens in their life

Entrepreneurs and their high levels of self-reliance are characterized by what?

an internal locus of control

Personal Resources

• Friends

• Family

• Personal credit cards

Loans

Sources include commercial banks, U.S. Small Business Administration (SBA), and peer-to-peer lending

Crowdfunding

Process of funding ventures by raising money from a large number of investors via the internet

Angel investors

Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership

Venture capital firms

Companies that invest in start-up businesses with high growth potential in exchange for a share of ownership

Market niche

A small segment of a market with fewer competitors than the market as a whole. Market niches tend to be quite attractive to small firms

Necessity entrepreneurs

launch a business because they believe it is their only economic option

Many small firms have lower what?

overhead costs

Small firms can develop much more personal relationships with?

Individual customers

Technology, especially the internet and online tools, have opened what for small businesses?

New opportunities