H

Study Notes: External/Internal Environments, Small Business & Entrepreneurship, and Financing (Chapters 1–3)

External Environment and Key Environments

  • External (in external environments of businesses): where/area where a business operates and generates revenue
    • Domestic: within a country (e.g., United States)
    • Global: international operations and influences (e.g., receiving raw materials from other regions, trade agreements)
    • Technological: telecommunications and electronics (e.g., devices used to send messages; staying up-to-date with technology)
    • Political-legal environment: relationship between business and government; government decisions affect business (tax changes, tariffs, incentives for startups)
    • Sociocultural environment: community-based preferences (e.g., restaurant adapting to local tastes; demand for natural/organic ingredients due to health concerns)
    • Economic environment: state of the economy (e.g., unemployment, price sensitivity; shift to budget-friendly products)
  • These external factors influence strategic decisions and must be monitored alongside internal factors.

Internal Environment and Resources

  • Internal factors (within the firm): what the firm controls
    • Labor (Human Resources): abilities of employees (e.g., coders, accountants, servers)
    • Capital: financial resources (credit, loans, cash reserves)
    • Physical resources: tangible assets required for operations
    • Intellectual/Information resources: data and information (economic data, market forecasts, weather trends, Nielsen ratings)
    • Intrapreneur: an internal entrepreneur who continues the spirit/vision after the initial idea is created
  • Order of importance (as stated): Entrepreneur, Capital, Labor, Information resources, Physical resources

Market Economy: Demand, Supply, and Prices

  • Market concepts:
    • Demand: willingness of buyers to purchase a good or service
    • Supply: ability and willingness of producers to offer a good or service for sale
    • Demand curve shows relationship between price and quantity demanded; as price increases, demand tends to decrease
    • Supply curve shows relationship between price and quantity supplied
  • Equilibrium concepts:
    • Equilibrium price: the price that balances buyer and seller expectations (the “optimal price”)
    • Market price (equilibrium): price at which quantity demanded equals quantity supplied for a category/type of product
    • The market price guides company pricing, production, and inventory decisions
  • Surplus and shortage:
    • Surplus: S > D (Supply exceeds Demand) → typically leads to lower prices or reduced production
    • Shortage: D > S (Demand exceeds Supply) → typically leads to higher prices or increased production
  • Visuals to study:
    • Demand curve and supply curve; equilibrium price can be observed where they intersect

Social Responsibility and Stakeholders

  • Social responsibility: maximizing positive contributions and minimizing negative ones (e.g., charity, environmental stewardship)
  • Overall objective: balance commitments to stakeholders beyond the firm (environmental sustainability, community impact)
  • Stakeholders include shareholders (owners of stock) and other groups: investors, vendors, suppliers, contractors, employees, customers/consumers, local community, environment
  • Organizational stakeholders: investors, vendors, suppliers, contractors, employees, customers/consumers, environment, local community
  • Consumerism: protecting consumer rights in dealings with businesses
  • Consumer Bill of Rights (1960s): protects consumers from exploitation; examples include safety, warning labels, nutrition and allergen labeling, expiration dates, choking hazards, and other safety information
  • Labels and warnings examples mentioned:
    • Nutrition labels, Allergen labels, Expiration dates, Do not consume warnings (e.g., skincare products for pregnant people)
    • Choking hazards; nicotine/tobacco warnings; age requirements; safety instructions for use
    • Product-specific cautions: hair dryers, energy drinks (caffeine), spices, medicines (child-safe packaging)
    • Hot beverages (coffee cautions), sharp objects warnings, age restrictions, consumer feedback channels
  • Consumer feedback and courteous service: encourage feedback via forms or social media; emphasize respectful and transparent communication
  • Pricing ethics:
    • Fair pricing and avoiding collusion (illegal anti-competitive agreements)
    • Avoid price gouging during peak demand (e.g., airports, cinemas, amusement parks)
  • Advertising ethics: truthful, non-misleading, non-offensive advertising; careful balance in provocative ads (e.g., high-profile campaigns)

Responsibility Toward Various Stakeholders (Expanded)

  • Employees:
    • Work-life balance (e.g., time off for family activities)
    • Professional development (workshops, training)
    • Respectful treatment of terminated employees (ethical dismissal)
  • Equal opportunity and whistleblowers:
    • Provide equal opportunity in hiring and treatment
    • Whistleblower: an internal individual who exposes malpractice and seeks regulatory or media oversight; aims to correct unethical actions
  • Investors/Shareholders:
    • Avoid insider trading (using confidential information for stock gains)
    • Avoid misrepresentation of finances (GAAP adherence; accurate financial reporting)
  • Suppliers & Community:
    • Build mutually beneficial supplier relationships; avoid extreme last-minute order changes that burden suppliers
    • Engage in community initiatives (scholarships, nonprofits); maximize positive impact, minimize negative effects
  • Environment:
    • Reduce pollution (air, water, land)
    • Green marketing of eco-friendly products and packaging; adopt sustainable production and materials
    • Carbon offset and environmental restoration initiatives
  • Greenwashing:
    • Misleadingly portraying products as environmentally friendly to mislead consumers (e.g., overemphasizing one small eco-friendly feature while overall impact remains high)

New Notes: Small Business and Entrepreneurship (9/1/25)

  • What makes a small business vs. large:
    • Independence (not part of a larger firm)
    • Number of employees (commonly fewer than 500–1500, per context; emphasis on smaller sizes)
    • Revenue/profitability and market influence are typically smaller
  • SBA (Small Business Administration): government agency that assists small businesses
  • Statistics cited:
    • 85% of all businesses have under 20 employees
    • 23% of the workforce works in small businesses
    • 97% of all businesses have fewer than 100 employees
    • Service businesses account for over half of all small businesses
    • Retail stores and construction are also substantial portions of small businesses
  • Entrepreneurship traits (Entrepreneur):
    • Resourceful, confident, creative
    • Concern for customer relations; strong networking ability
    • Strong desire to be their own boss
    • Willing to deal with uncertainty and risk; open to others’ ideas; not stubborn about own idea
  • Entrepreneurship (process):
    • Process of seeking business opportunities under conditions of risk
  • Distinctive competencies for success:
    • Established market: many competitors; defined criteria; hard to penetrate
    • Niche: tap into an underserved segment (e.g., allergen-friendly bakery)
    • First mover: potential advantages (brand loyalty, learning curve) but risk of copycats
  • Starting a new business: the business plan describes strategy and implementation
    • 1) Executive summary: snapshot of the business
    • 2) Company overview: competitive advantages
    • 3) Market analysis: industry, target market, competition, differentiation, projected growth
    • 4–6) Other components (slide 8): likely operations plan, management/organization, and financial plan (not explicitly detailed in transcript; listed as “the other 3”)

Financing and Support for Small Businesses (9/3–9/5/25)

  • SBA funding centers: Small Business Administration business development centers (e.g., local offices) help with market trends, demographics, licenses, taxes, etc.
  • Franchise definitions: an arrangement where a buyer purchases the right to sell the seller’s goods/services (franchiser) under a defined system
  • Financing options:
    • SBA loans: more willing to lend than banks; assess credit history and other factors; often favorable terms for small businesses
    • Venture capital (VC): groups of investors funding startups; expect equity stake and potential returns; VCs seek ownership/portion of profits
    • Cosigners: individuals who guarantee a loan; can help secure financing but carry liability

Chapter 3: Business Forms and Plans (9/5/25 onward)

  • Business forms and taxes:
    • Sole proprietorships, partnerships, LLCs, corporations
    • Tax benefits: pass-through taxation and deductions available to some forms (sole props, partnerships, LLCs)
  • Limited Partners vs General Partners:
    • Limited partner: silent investor; liability limited to invested amount
    • General partner: active management; unlimited liability
  • Demographics and sales composition:
    • Approximately 71.95ackslash ext{%} of businesses are sole proprietorships
    • 10.6ackslash ext{%} are partnerships
    • Most sales revenue comes from corporations
    • Sole proprietorships contribute a smaller share of sales revenue (approx. 3.82ackslash ext{%})
  • Corporate taxation concepts:
    • Corporations face double taxation on profits (corporate level and personal dividends)
    • Alternatives to avoid double taxation: LLCs or S corporations (hybrids with favorable tax treatment)

Test Preparation and Key Focus (9/8/25)

  • Study emphasis for the upcoming test:
    • Distinguish between Domestic vs Global vs Technological environments for slides on external factors
    • Identify which resources are referenced in the notes for slide 4
    • Be able to list and describe all five factors of production as presented in the notes and relate them to external/internal environment concepts
    • Review consumerism, social responsibility, and organizational stakeholders from Chapter 2
    • Master Chapter 3 content: services, retail, and construction; understand the three core components of a business plan (exec summary, company overview, market analysis) and the other three components (as referenced on slide 8)

Five Factors of Production (External/Internal Context)

  • The five factors of production discussed include:
    • Land/Natural resources
    • Labor
    • Capital
    • Entrepreneurship
    • Information/Knowledge (information resources)
  • Note: The transcript uses a slightly broader interpretation that includes information resources as a key factor alongside traditional four factors; apply this framework when analyzing business scenarios.

Equilibrium, Surplus, and Shortage: Quick References

  • Equilibrium price: P^* where Qd = Qs
  • Surplus: Qs > Qd; price tends to fall to clear excess supply
  • Shortage: Qd > Qs; price tends to rise to clear excess demand
  • Market price guidance helps determine pricing, production levels, and inventory decisions

Quick Definitions Recap

  • Domestic vs Global vs Technological environments: core categories for external analysis
  • Intrapreneur: internal agent who sustains entrepreneurial spirit within an established firm
  • Greenwashing: misleading environmental claims; beware overclaiming eco-friendliness
  • Consumer Bill of Rights: foundational consumer protections (safety, labeling, expiration, etc.)
  • Stakeholders vs Shareholders: stakeholders include broader groups affected by business actions beyond owners
  • SBA Loans vs VC: different risk/return profiles and control implications; SBA tends to be more accessible to small firms; VC involves equity stake
  • LLC and S corporation: tax-efficient hybrids to mitigate double taxation

Practical Takeaways for Exams

  • Be able to categorize external environment factors and give a real-world example for each ( Domestic, Global, Technological, Political-legal, Sociocultural, Economic )
  • Be able to articulate internal resources and the role of intrapreneurs in sustaining innovation within a firm
  • Explain demand, supply, equilibrium, and the implications of surpluses and shortages on pricing strategy using basic relationships Qd = f(P) and Qs = g(P), with the equilibrium condition Qd = Qs
  • Understand social responsibility and the stakeholder framework, and identify examples of ethical/illegal practices (collusion, price gouging, misrepresentation of finances)
  • Recognize key consumer protection labeling requirements and why they exist (safety, allergy, expiration, etc.)
  • Distinguish common small business forms (sole proprietorship, partnership, LLC, corporation) and their tax implications; know the double taxation issue and how LLC/S-corp can mitigate it
  • Know the SBA’s role in funding and support, and the general differences between SBA loans and VC funding
  • Familiarize yourself with the structure of a basic business plan: executive summary, company overview, market analysis, and the remaining components (operations, management, financial plan) as implied by standard practice
  • Review the common statistics about small businesses (employee counts, sector distribution) to contextualize the landscape