Midterm #3 Flashcards
what is sole proprietorship? (form of business)
what are the benefits and the risks?
easy, quick, affordable, adaptable,
full control with minimal administration
risks: personal exposure, credibility
how do you form a sole proprietorship/make it legal?
choose name, filed an assumed business name with the secretary of state, obtain licenses, obtain an employer identification number
what is a partnership?
UNLIMITED LIABILITY, LIMITED LIFE AND LIMITED CAPITAL
partners maintain control and benefit (owners=partners)
voluntary association, unlimited liability
prepare a partnership agreement, mutual agency
limited life (debt, death, etc); limited capital access
how are partnerships regulated and taxed?
relatively unregulated, SINGLE taxation
how are corporations regulated/taxed?
government regulation, DOUBLE taxation
what is a domestic corporation?
operate in the state in which it is incorporated
what is a foreign corporation?
operate in states other than state of incorporation
what is an alien corporation?
organized in one country and operate in another
which state has the most fortune 500 companies hqs?
delaware (best/least taxes on companies)
what is common stock?
voting rights (proxy), residual claims to assets, shares that allow holder to get dividends
what is preferred stock?
no vote, first claim to income (dividend), first claim on assets after debt is paid, higher claim to assets than common stock
what is a B corporation?
certified by nonprofit B lab, meet standards of social and environmental performance; more than 4k B corps
what is the corporation required to do by law?
to create wealth for its stockholders
what is fiduciary responsibility?
relationship between the US (economy) and the corporation (business), responsibility to promote and create wealth
what is the 3 P approach, in relation to B corps?
people, planet, profit — connects to the triple bottom line where B corps focus on all 3 P’s instead of just profit
what is an LLC?
limited liability company; benefits: single taxation, flexibility, limited liability
what is a merger?
when 2 companies combine into 1
what is an acquisition?
when one firm buys another
what are horizontal, vertical and conglomerate acquisitions?
horizontal: same industry
vertical: distribution channel, suppliers/distributors
conglomerate: separate industry/unrelated businesses
what is an entrepreneur?
someone who creates a new business to make money by taking advantage of opportunities and using resources to capitalize on them – someone who doesnt have the backing of an established company
how many businesses, in the US, are started each year by businesses?
more than 6 million
what are some characteristics of an entrepreneur?
take initiative, appreciate risk, confident, self-reliance, perseverance
what is innovation?
tool used by entrepreneurs, process used to create new ideas
what are some weaknesses of entrepreneurs?
often lack natural or exemplary leadership skills
how are entrepreneurs commonly presented?
heroes or villians
what are some reasons businesses fail?
declining market, lack of succession plan, dysfunctional management, operational inefficiencies, operational mediocrity, lack of cash cushion, poor accounting, out-of-control growth, owners who cant get out of their own way, business just doesnt work
what is purposeful innovation?
meaningful contribution through: new or different value, combining resources in a more productive way
what is intrapreneurship?
having/applying an entrepreneurial mindset within an established organization, stimulates innovation in a large company — foster creativity and new ideas for the company to keep growing
what is crowdsourcing?
practice of getting necessary services, ideas, or content by soliciting contributions from a large group of people, especially an online community – not employees
what is an entrepreneurship process?
entrepreneurial mindset, idea, opportunity analysis, feasibility analysis, business plan, funding
what is opportunity analysis?
two areas of focus: determine how attractive an industry is overall as a new business, identify possible niches a new entrant can occupy profitably
what is feasibility analysis?
“should we proceed with this business idea?”
what is product or service feasibility analysis?
determines degree to which product/service idea appeals to potential customers; identifies resources necessary to produce it
what is financial feasibility analysis?
straightforward haha
what are the 3 proforma statements?
balance sheet, cash flow statement, profit and loss statement
what are the 2 functions of the business plan?
- guiding company by charting its future course and defining its strategy
- attracting lenders and investors who will provide capital
what is equity capital?
personal investment of owners in the firm, called “risk capital” because investors assume risk of losing money if business fails
what are the sources of equity financing?
personal savings, friends and family, angel investors, partners, corporations, public stock sale
what are angel investors?
private investors in emerging start-ups in exchange for equity stakes
what is management?
accomplishing organizational goals through planning, organizing, leading, and controlling people and resources
what is leadership?
influencing and inspiring others to work to achieve a common goal, setting a good example, giving them power and freedom to accomplish it
what do leaders create?
a vision
what do managers create?
goals
what do effective managers and leaders do?
hire the right employees, build a culture, communicate the shared vision, motivate workers to perform
what does POLC stand for?
Planning, Organizing, Leading, and Controlling
what is a mission statement?
outline of fundamental purposes of the organization (philosophy, long-term survival needs, customer needs, social responsibility)
what are planning goals?
broad and long term accomplishments that an organization wishes to attain
what are planning objectives?
specific, short term statements detailing how to achieve the orgs goals
what 2 fundamental questions does planning answer?
what is the situation now? (swot analysis)
how can we get to our goal from here? (strategic, tactical, operation, and contingency planning)
what is SWOT analysis?
internal STRENGTHS
internal WEAKNESSES
external OPPORTUNITIES
external THREATS
what is strategic planning?
broad, long range goals by top managers;
major goals, and finding strategies to accomplish
what is tactical planning?
identification of specific short range objectives by lower level managers; developed and detailed
what is operational planning?
the setting of work standards and schedules to implement tactical objectives
what is contingency planning?
backup plans in case of failure
what is the rational decision making model?
- define the situation
- describe and collect needed information
- develop alternatives
- decide which alternative is best
- do what is indicated
- determine whether decision was a good one and follow up
what is problem solving?
solving everyday problems, less formal than decision making, quicker action
what are the levels of management?
top management — middle management — supervisory management — non supervisory
what is the COO?
chief operating officer (donna)
what is the CFO?
chief financial officer
what is CIO?
chief information officer
what are the 3 skills all employees need in organizing?
human relations (communication), conceptual (broad vision), technical (tactile skills)
why is staffing and hiring the right people so important?
expensive investments in people, in high employment hard to find the right people, many will demand fair wages/treatment
what is an autocratic leadership style?
make decisions without consulting others
what is a participative/democratic leadership style?
managers and employees work together to make decisions
what is the free-rein leadership style?
managers set objectives and employees are relatively free to do whatever it takes to accomplish objectives
what is leading (in broad definition)?
empowering workers, authority to make decisions, more coach less boss, enabling
what is controlling (in broad scope)?
control function, measures performance relative to planned objectives, rewards people for work well don, takes corrective action
what countries does the US consumer mainly buy from?
canada, mexico, china, europe
what is globalization?
integration and free movement of people, goods, services, and capital across national borders; influences supply and demand
why is there globalization? why is it beneficial for the economy and businesses?
increase revenue, access different markets, reduce costs, access different materials
what are the major drivers of globalization?
- declining trade and investment barriers
- technological change
what are the 3 major technological advances of globalization?
communication, information processing, transportation
what does WTO stand for?
World trade organization
What does the WTO do?
“police force” for world trading system
what does the international monetary fund do?
maintains order in the international monetary system
what does the world bank do?
promotes economic development
what does the united nations do?
attempts to maintain international peace and security
what is the need for the cruck?
to bypass import taxes on trucks from foreign countries (subaru brat)
what is importing?
buying products from another country
what is exporting?
selling products to another country
what is the inspiration for US exporting?
boosts the economy, improves employment numbers
why does international trade exist?
no nation is entirely self-sufficient, to meet citizens’ needs, mutually beneficial exchange
what is the mutually beneficial exchange? (in terms of international trade)
countries with abundant natural resources need access to foreign markets or tech from other countries
what is free trade? (in terms of international trade)
movement of goods and services among nations without political or economic barriers
what are the comparative advantages of free trade?
a country should sell the products it produces most efficiently and buy from other countries the products it cannot produce as efficiently
what is the absolute advantage to free trade?
a country has a monopoly on producing a specific product or produce is most efficiently
what are the debate/arguments against globalization?
jobs and income, labor policies and ecological environment, national sovereignty and culture, the world’s poor
what is outsourcing?
firm contracts with other firms to do some or all of its functions; could outsource payroll, accounting, manufacturing; offshore outsourcing!
what is the balance of trade? (in terms of global trade)
TOTAL EXPORTS = TOTAL IMPORTS
total value of a nations exports compared to imports over a particular period
what is the trade surplus? (in terms of global trade)
VALUE OF EXPORTS>IMPORTS
when the value of country’s exports is more than that of its imports — FAVORABLE
what is the trade deficit? (in terms global trade)
when the value of country’s exports is less than that of its imports
what are the forces affecting trade in global markets?
sociocultural, economic and financial forces, legal and regulatory, physical and environmental
what are sociocultural forces?
set of values, beliefs, rules, and institutions held by a specific group of people
what are examples of sociocultural forces?
social structures, religion, manners, customs, values, language, personal communication
what are exchange rates?
value of one nations currency relative to currencies of other countries
what is the high value of the dollar?
dollar is trading for more foreign currency; foreign goods are less expensive!
what is the low value of the dollar?
dollar is trading for more foreign currency; foreign goods are more expensive!
what are legal and regulatory forces? (affecting global trade)
no global/international system of laws, laws may be inconsistent, US firms must follow US laws while conducting global business
what are the environmental forces?
developing countries have transportation and storage systems that make international distribution difficult or impossible
what is licensing?
when a firm (licensor) provides the right to manufacture its product of use its trademark to a foreign company (licensee) for a fee (royalty)
what is franchising?
a contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area
what is contract manufacturing?
a foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark — outsourcing
what are joint ventures?
partnership in which two or more firms join to undertake a major project
what are strategic alliances?
partnership between two or more firms established to help each firm build competitive advantage; dont typically share costs, risks, management, or profits
what is foreign direct investment (FDI)?
buying of permanent property and business in foreign nations
what is a foreign subsidiary?
firm owned in a foreign country by another firm (parent)
what are the advantages and disadvantages of foreign subsidiaries?
advantage: parent maintains control over tech/expertise
disadvantage: must commit funds and tech within foreign boundaries
what are the 7 instruments of trade policy?
tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies, antidumping policies
what are tariffs?
tax levied on imports, raising the cost of imported products relative to domestic products
why do governments impose tariffs?
increase government revenue, provide protection to domestic producers against foreign competitors by increasing the cost of imported foreign goods, force consumers to pay more for certain imports, tariffs are pro-producer and anti-consumer and tariffs reduce the overall efficiency of the world economy
what are subsidies?
government payment to a domestic producer, help domestic producers – compete against low-cost foreign imports gain export markets, consumers typically absorb costs of subsidies
what are import quotas?
direct restriction on the quantity of goods imported into a country
what is dumping?
selling goods in a foreign market far below cost of production or selling goods below their “fair” market value; method to unload excess production
why are there anti-dumping policies?
predatory behavior: profits from home markets to subsidize prices in a foreign market, drives indigenous competitors out of that market, later raising prices
what are some common ethical issues with global business?
employment practices, human rights, environmental regulations, corruption
what is corruption? (in simple terms)
dishonest behavior by those in positions of power, such as business managers or government officials.
what are the 3 levels of ethical standards?
- the law
- organizational policies and procedures
- the moral stance employees take when faced with decisions not governed by formal rules
what is the definition of ethics?
the standards of moral behavior, behaviors accepted by society as right vs wrong
what is the front page test?
a test/mindset that if any of the internal business movements were displayed on the front page of a newspaper, they shouldn’t affect or should positively affect that business’s reputation
where do ethics originate?
organizational ethics begin at the top, managers and leaders set the example and instill core values of the company
what are the basic rights of consumers?
the right to: safety, to be informed, to choose, to be heard
how does a manager shape the organization and the world that employees inhabit?
employment agreement, structure of the job (task), interpersonal interaction
why do some managers behave unethically?
personal ethics code, do not realize they are behaving unethically, organizations culture, unrealistic performance goals, unethical leadership
what is the fraud triangle?
perceived opportunity, rationalization, perceived pressure
what are examples of the fraud triangle?
enron, tyco, worldcom
what are the causes of the enron scandal?
conflict of interest, lack of attention, lack of truthfulness, enrons culture
what is the sarbanes-oxley act of 2002?
establishes new or enhanced standards for all US public company boards, management, and public accounting firms — AKA sarbox
what is the dodd-frank wall street reform and consumer protection act of 2010?
comprehensive regulation of financial markets, the consolidation of regulatory agencies, consumer protection reforms, tightened regulation of credit rating agencies
why was the dodd-frank wall street reform and consumer protection act of 2012 passed?
in response to the financial crisis of 2008, most significant changes to financial regulation in the US since the great depression
what is business ethics?
the accepted principles of right or wrong governing the conduct of business people; often codified into laws but behaving ethically goes beyond staying within the law
what are some ethical issues?
self-dealing, information manipulation, anticompetitive behavior (intentionally harming competitors), opportunistic exploitation, substandard working conditions, environmental degradation, corruption
what is the friedman doctrine?
as long as the company stays within the law and the rules of the game without deception or fraud – anything is free game to increase profit
what is the freeman/stakeholder theory?
companies should bear responsibilities to all of the individuals their activities affect and upon whom their existence depends
what role does marketing and promotion play into ethics?
creating awareness, creating an image, reaching the target market, value and purpose, connecting with your market and building loyalty —- all can impact generations with possible misinformation to garner profit
what is corporate social responsibility?
companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment
what is a private enterprise?
market turns self-interest into social good
what is required to have a private enterprise? how is it ensured?
private property, freedom of choice, right to keep profits, fair competition — all ensured by the government
what are some problems with business?
power of business vs consumer; actions of business vs consumer; public reaction; governments reaction
what is government intervention? what is the purpose?
ensure fair competition, private property, freedom of choice, right to keep profits
promote economic health, social responsibility, correct market failures, ethical lapses
how is government intervention enacted?
rule of law, industry regulation
what is common law?
judges establish when deciding disputes - precendents
what is statutory law?
enacted by a federal or state legislature
what is administrative law?
regulations passed by state and federal administrative agencies
what is the role of the judiciary branch?
settles disputes through application of law, trial courts (dispute is first heard) and appellate courts (dispute heard again if lower court errors)
what is criminal law? what is the punishment?
dispute between government and individual; fines and/or imprisonment
what is civil law? what is the punishment?
dispute between two individuals; fines
what is torts?
civil wrong inflicted on other people or their property; include all wrongs that are not a breach of contract
what are some examples of torts?
assault, slander, libel, product liability, fraud
what is fraud?
someone ‘hurts’ another by deception or manipulation, something said or done in a dishonest way to trick people
what is alternative dispute resolution?
arbitration and mediation
what is arbitration?
binding, non-binding
what is meditation?
non-binding… always
what are the types of property?
real, personal (and intellectual)
what is real property?
real estate and everything permanently attached to it
what is personal property?
everything else (tangible and intangible)
what is intellectual property?
generate by a persons creative activities (ex musical works, artwork, computer software)
what types of intellectual property are there?
patent, trademark, copyright
what is a patent?
inventors get exclusive right to inventions (20 years)
what is a trademark?
symbols used by firms to identify; distinctive word, symbol, design, name, logo, slogan – noted by the R circle symbol
what is a copyright?
authors have exclusive rights to documents; literary, dramatic, musical, and artistic works, denoted by C circle symbol
what is a patent troll?
a company or person that acquires a lot of patents without the desire to actually develop the products
what is a genericized trademark?
primary meaning of the genericized trademark becomes the product or service itself – kleenex, aspirin
what is a patent vs a trade secret?
patent is limited in time, requires compliance, and takes effect immediately; trade secrets: others can reverse engineer, anyone may use it once discovered, may be otherwise patented
what is a breach of contract?
a violation of a valid contract where the injured party goes to court to enforce contract and sometimes collect damages
what is agency?
acts on behalf of another (in others interest)
what are the 3 elements of a contract?
legal purpose, consideration, voluntary agreement
what is contractual capacity?
to be a legal the parties must have a legal ability to enter into the contract - they must have contractual capacity
who are some people who lack contractual capacity?
minors, mentally unstable/incapable/insane, intoxicated, under duress or coercion
what is bankrupcty?
give an honest debtor a “fresh start” in life by relieving the debtor of most debts
what did the 2005 personal bankruptcy laws change?
require people with income at certain levels to pay some or all of their financial obligations
what is the uniform commercial code?
first published in 1952, seeks to “harmonize” the law of commercial transactions in all 50 states
what are express warranties?
specifically defined by the seller
what are implied warranties?
legally imposed on seller/disclaimed
what are the governments other roles?
manage money, take money out of markets, put money into markets, regulate industries
what is the FDA?
the food and drug administration
what is the FTC?
federal trade commission
what is “business model thinking”?
large goals, product development and startup ventures, language for communicating
what are the 9 components of business models?
- value propositions
- customer segments
- channels (of distribution)
- customer relationships
- revenue model
- key resources
- key partnerships
- key activities
- cost structure
what are value propositions?
solving a need or product, development: question assumptions, iterate through learning; making business valuable, “selling” the business
what is customer segments?
business exists for customers, not vice versa
what are channels?
distribution, supply chain, product life cycle; sales channels
what are customer relationships? how are they maintained?
get, grow, and keep customers; get: CRM, customer acquisition costs; grow: grow from existing customers; keep: maintain current customers, satisfy
what are key resources in the business model?
finance, physical, intellectual…. assets
what are the key partnerships in a business model?
partners and suppliers, interdependent
what are the key activities in the business model?
most important attributes, value chain
what is the cost structure of the business model?
most expensive key activities
