Intro to Business - Test 1

List, define, and describe the strategies for reaching global markets.

Firms wanting to enter global trade have many options. The six strategies most commonly used include: foreign outsourcing and importing, foreign exporting, licensing, franchising, and direct investment. -Foreign outsourcing involves contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production. -Importing is the buying of products overseas that have already been produced overseas to be consumed in the domestic market, rather than contracting with overseas manufacturers to produce special orders. -Exporting is the most basic level of international market development. It simply means producing products domestically and selling them abroad. -Foreign licensing involves a domestic firm granting a foreign firm the rights to produce and market its product or to use its trademark/patent rights in a defined geographical area. The company that offers the rights, or the licensor, receives a fee from the company that buys the rights, or the licensee. This approach allows firms to expand into foreign markets with little or no investment, and it also helps circumvent government restrictions on importing in closed markets. -Foreign franchising is a specialized type of licensing. A firm that expands through foreign franchising, called a franchisor, offers other businesses, or franchisees, the right to produce and market its products if the franchisee agrees to specific operating requirements—a complete package of how to do business. Franchisors also often offer their franchisees management guidance, marketing support, and even financing. In return, franchisees pay both a start-up fee and an ongoing percentage of sales to the franchisor. A key difference between franchising and licensing is that franchisees take over the identity of the franchisor. -Foreign direct investment in foreign production and marketing facilities represents the deepest level of global involvement. The cost is high, but companies with direct investments have more control over how their business operates in a given country. -Joint ventures involve two or more companies joining forces—sharing resources, risks, and profits, but not merging companies—to pursue specific opportunities. A formal, long-term agreement is usually called a partnership, while a less formal, less encompassing agreement is usually called a strategic alliance. Joint ventures are a popular, though controversial, means of entering foreign markets.

What is a partnership? Describe the basic features of the three major types of partnerships: general partnerships, limited partnerships, and limited liability partnerships.

-A partnership is a voluntary arrangement under which two or more people act as co-owners of a business for profit. There are three major types of partnerships. -In a general partnership, all partners can take an active role in management, share in the profits, and have unlimited liability for the firm's debts. -A limited partnership consists of at least one general partner, who participates actively in managing the company and assumes unlimited liability, and at least one limited partner, who gives up the right to participate in management in exchange for limited liability. Both types of partners contribute financially to the company and share in its profits. -The limited liability partnership is a relatively new form of partnership that allows all partners to participate in management while retaining some degree of limited liability. The amount of liability protection offered by LLPs varies among states.

List and describe the five key dimensions of the broader business environment.

-Economic environment: The U.S. economy is a global powerhouse, largely because the government actively supports free enterprise and fair competition. -Competitive environment: As global competition intensifies, leading-edge companies are focusing on long-term customer satisfaction as never before. -Technological environment: The recent technology boom has transformed business, establishing new industries and burying others. -Social environment: The U.S. population continues to diversify. Consumers are gaining power, and society has higher standards for business behavior. -Global environment: The U.S. economy works within the context of the global environment. A key factor: rapid economic growth in China and India.

Define active listening. What role does active listening play in an organization?

Active listening is the attentive listening that occurs when the listener focuses his or her complete attention on the speaker. Active listening plays an obvious role in business success. Statistics collected on active listeners correlate the level of one's rank in the chain of command of an organization and the amount of active listening that occurs. Hourly employees may spend 30 percent of their time listening, while managers often spend 60 percent, and executives might spend 75 percent or more. Interestingly, top salespeople also tend to spend about 75 percent of their communication time listening. When you listen, try to make yourself pay closer attention to the speaker. You'll find that people tend to tell more to those who listen better, so if you polish your listening skills, you're also likely to buff up the quality of what you know and when you know it.

Explain business ethics and ethical dilemmas. Give an example of an ethical dilemma.

Business ethics is the application of right and wrong, good and bad in a business setting. But this isn't as straightforward as it may initially seem. The most challenging business decisions seem to arise when values are in conflict. When whatever one does has a negative consequence, forcing to choose among bad options it is a true ethical dilemma. Erica has just done a great job on a recent project at your company. Susan, Erica's boss, has been very vocal about acknowledging her work and the increased revenue that resulted from it. Privately, Susan tells Erica that she has clearly earned a bonus of at least 10%, but due to company politics, she was unable to secure the bonus for Erica. She also implied that if Erica could submit inflated expense reports for the next few months, she would look the other way, and Erica could pocket the extra cash as well-deserved compensation for her contributions.

List three communication channels, the level of richness for each, and explain when it is appropriate to use each one.

Communication Channel Channel Richness When should you use this channel? Memos/Reports Very low: Your audience won't gain any information from your tone or your body language. ·When your content is uncontroversial. ·When you must reach a number of people with the same message. ·When you must communicate lengthy or detailed information. Email Very low: Here, too, your audience learns nothing beyond your words themselves. ·When your content is uncontroversial. ·When you must reach a number of people with the same message. Instant Message/Texting Very low: This is due to the fact that so many of us IM or text with as few words as possible, your audience will pick up only the basics. ·When your content is uncontroversial. ·When you want a quick response regarding relatively simple issues. ·When you know that your audience won't be annoyed by it. Voice Mail Low: Your audience has the benefit of hearing your tone but not seeing your body language. ·When your content is uncontroversial. ·When you don't need a record of your message (but don't forget that the recipient can easily save or forward your voice mail). Telephone Conversation Moderate: Your audience benefits from hearing your tone and how it changes through the call. ·When you have time urgency in terms of either delivering your message or getting a response. ·When your content is more personal or controversial. ·When you need or want a spontaneous, dynamic dialogue with the recipient. Videoconferencing High: Especially with state-of-the-art equipment, the channel conveys much of the richness of actually being there. ·When you need to reach multiple people with complex or high-priority content. ·When you need or want a spontaneous, dynamic dialogue with an audience that you cannot reach in person. In-Person Presentation High: Your audience directly experiences every element of your communication: from verbal content, to tone, to body language. ·When you need to reach a large audience with an important message. ·When you need or want to experience the immediate response of your audience. Face-to-Face Meeting Very high: Your audience experiences your full message even more directly. ·When your message is personal, emotional, complex, or high-priority (but if the recipient might be volatile, you should consider using a less-immediate channel). ·When you need or want instant feedback from your audience.

Identify and describe two opportunities and two threats to small business success.

Most small businesses enjoy a number of advantages as they compete for customers. But they also must defuse a range of daunting potential threats in order to succeed long term. Opportunities: -Market Niches. Many small firms are uniquely positioned to exploit small but profitable market niches. These sparsely occupied spaces in the market tend to have fewer competitors because they simply aren't big enough—or high enough profile—for large firms. They nonetheless offer more than enough potential for small, specialized companies. -Personal Customer Service. With a smaller customer base, small firms can develop much more personal relationships with individual customers. The personal touch can be especially beneficial in some foreign markets, where clients prize the chance to deal directly with top management. -Lower Overhead Costs. With entrepreneurs wearing so many hats, from CEO to customer service rep, many small firms have lower overhead costs. They can hire fewer managers and fewer specialized employees. Perhaps more importantly, smaller firms—due to a lack of resources—tend to work around costs with tactics such as establishing headquarters in the owner's garage or offering employees flexible schedules instead of costly healthcare benefits. -Technology. The Internet has played a powerful role in opening new opportunities for small business. Using a wealth of online tools, from eBay to eMachineshop, companies-of-one can create, sell, publish, and even manufacture goods and services more easily than ever before. The Web has also created international opportunities, transforming small businesses into global marketers. Threats: -High Risk of Failure. Starting a new business involves risk—a lot of risk—but the odds improve significantly if you make it past the five-year mark. -Lack of Knowledge and Experience. People typically launch businesses because they either have expertise in a particular area—like designing websites, or cooking Vietnamese food—or because they have a breakthrough idea—like a new way to develop computer chips or run an airline. But in-depth knowledge in a specific area doesn't necessarily mean expertise in running a business. Successful business owners must know everything from finance to human resources to marketing. -Too Little Money. While the media is filled with stories of business owners who made it on a shoestring, lack of start-up money is a major issue for most new firms. Ongoing profits don't usually begin for a while, which means that entrepreneurs must plan on some lean months—or even years—as the business develops momentum. -Bigger Regulatory Burden. Complying with federal regulations can be challenging for any business, but downright overwhelming for small firms. -Higher Health Insurance Costs. Administrative costs for small health plans are much higher than for large businesses, making it even tougher for small firms to offer coverage to their employees.

What are the major funding options for small businesses? Which of these options is most likely to be used by the majority of start-ups?

Personal Resources. This is the most common source of new business financing. -The financial requirements of most new firms typically force entrepreneurs to tap personal resources such as family, friends, and credit cards. -Loans. Getting commercial loans for a new venture can be tough. Banks and other lenders are understandably hesitant to fund a business that doesn't have a track record. They also require a lot of paperwork and often a fairly long waiting period. -U.S. Small Business Administration. The Small Business Administration (SBA) doesn't give free money—neither grants nor interest-free loans—but they do partially guarantee loans from local commercial lenders. This reduces risk for the lender, who is, in turn, more likely to lend money to a new business owner. The SBA also has a microloan program that lends small amounts of money—$10,000 on average—to start-up businesses through community nonprofit organizations. -Peer-to-peer lending. Peer-to-peer lending is a new potential funding source for new business start-ups that brings borrowers and lender together. It is an easier way for entrepreneurs to get money with more favorable terms. Websites such as Prosper.com and LendingClub.com bring the borrowers and lenders together. -Angel Investors. Angel investors are wealthy individuals who invest in promising start-up companies for one basic reason: to make money for themselves. They tend to look for opportunities to invest in companies that are likely to grow very rapidly (30-40 percent per year) and then be sold or go public. -Venture Capital. Venture capital firms fund high-potential new companies in exchange for a share of ownership, which can sometimes be as high as 60 percent. Only about 2 percent of new businesses receive funding from venture capital firms, but such transactions tend to be highly visible and attract a lot of attention. In addition to funding, venture capital firms often provide advice and guidance to the firm.

Describe the role of the board of directors. Explain their duties.

The board of directors oversees the operations of their company and protects their interests. The board of directors establishes the corporation's mission and sets its broad objectives. But board members seldom take an active role in the day-to-day management of their company. Instead, in accordance with corporate bylaws, the board appoints a chief executive officer (CEO) and other corporate officers to manage the company on a daily basis. The board also sets the level of compensation for these officers and monitors their performance to ensure that they act in a manner consistent with stockholder interests. It also provides advice to these officers on broad policy issues, approves their major proposals, and ensures that the company adheres to major regulatory requirements.

Define and explain effective communication. Why is it important in the business environment?

While communication is the transmission of information between a sender and a receiver, effective communication only happens when you transmit meaning—relevant meaning—to your audience. Communication must be dynamic, fluid, and two-way, which includes listening. Seeking and understanding feedback from your audience—and responding appropriately—forms the core of successful business communication. An example of effective communication's importance to a business is how skillful communicators develop deeper, more trusting relationships with their colleagues. Those relationships in turn allow them to have greater influence on the people around them. Good communicators identify and surmount communication barriers that stand between them and their audience. The result: greater long-term success in every aspect of business.

Explain the concepts of supply and demand in a free market.

he concepts of supply and demand explain how the dynamic interaction between buyers and sellers directly affects the range of products and prices in a free market. Supply refers to the quantity of products that producers are willing to offer for sale at different market prices. Since businesses seek to make as much profit as possible, they are likely to produce more of a product that commands a higher market price and less of a product that commands a lower price. The relationship between price and quantity from a supplier standpoint can be shown on a graph called the supply curve. The supply curve maps quantity on the x-axis and price on the y-axis. In most categories, as the price rises, the quantity produced rises correspondingly, yielding a graph that curves up as it moves to the right. Demand refers to the quantity of products that consumers are willing to buy at different market prices. Since consumers generally seek to get the products they need or want at the lowest possible prices, they tend to buy more products with lower prices and fewer products with higher prices. The relationship between price and quantity from a demand standpoint can be shown on a graph called the demand curve. Like the supply curve, the demand curve maps quantity on the x-axis and price on the y-axis. But different from the supply curve, the demand curve for most goods and services slopes downward as it moves to the right, since the quantity demanded tends to drop as prices rise.