Fashion business practices test 2 study guide

Participative leadership

leadership style in which all members of a team are involved in identifying essential goals and developing strategies to reach those goals

Venture capital

money that is invested in small (and sometimes struggling) firms that have the potential to become very successful

Small business

one that is independently owned and operated for profit and is not dominant in its - Represent 99.9 percent of all employer firms

Entrepreneurial leadership

personality-based leadership style in which the manager seeks to inspire workers with a vision of what can be accomplished to benefit all stakeholders

Small-business investment companies (SBICs)

privately owned firms that provide venture capital to small enterprises that meet their investment standards

Strengths

refer to a firm's favorable characteristics and core competencies. Core competencies - approaches and processes that a company performs well that may give it an advantage over its competitors

Opportunities

refer to favorable conditions in the external environment that could benefit the organization if properly exploited.

Weaknesses

refer to internal limitations a company faces in developing or implementing plans.

Autocratic leadership

task-oriented leadership style in which workers are told what to do and how to accomplish it without having a say in the decision- making process

Leadership

the ability to influence others - Leadership is different from management in that a leader strives for voluntary cooperation, whereas a manager may have to depend on coercion to change employee behavior.

Decision making

the act of choosing one alternative from a set of alternatives.

Franchising

the actual granting of a franchise

Directing

the combined processes of leading and motivating

Total quality management (TQM)

the coordination of efforts directed at improving customer satisfaction, increasing employee participation, strengthening supplier partnerships, and facilitating an organizational atmosphere of continuous quality improvement

problem

the discrepancy between an actual condition and a desired condition • Most people consider a problem to be "negative," but a problem can also be "positive."

Strategic planning process

the establishment of an organization's major goals and objectives and the allocation of resources to achieve them

SWOT analysis

the identification and evaluation of a firm's strengths, weaknesses, opportunities, and threats

Controlling

the process of evaluating and regulating ongoing activities to ensure that goals are achieved

Leading

the process of influencing people to work toward a common goal

Motivating

the process of providing reasons for people to work in the best interests of an organization • Part of a manager's job is to determine what factors motivate workers and try to provide those incentives to encourage effective performance.

Objective

• Objective - a specific statement detailing what an organization intends to accomplish over a shorter period of time - Example: Ulta states that the company will increase its sales of lip balm by 20% over last year's sales

Financial benefits of TQM programs:

• • • Lower operating costs Higher return on sales and on investments An improved ability to use premium pricing rather than competitive pricing

Threats

conditions or barriers that may prevent the firm from reaching its objectives.

The People in Small Businesses: The Entrepreneurs

"People who risk their time, money and other resources to start and manage a business." - Aim to change the world through blockbuster goods or services - Deliver the best ideas, changing the economic and social landscape BUT always to earn a profit for themselves

Key Management Skills

+Conceptual- the ability to think in abstract terms +Communication- the ability to speak, listen, and write effectively +Technical- Specific skills needed to accomplish a specialized activity +Interpersonal- The ability to deal effectively with other people +Analytic- The ability to identify problems correctly, generate reasonable alternatives and select the best alternatives to solve problems.

Two ways to raise capital

- Angel investors: individuals who invest in start-up companies with high growth potential in exchange for a share of ownership - Crowdfunding: The process of funding ventures by raising money from a large number of investors via the internet (such as a Kickstarter)

Operational Plans

- Designed to implement tactical plans - Plan is one year or less - Deals with how to accomplish specific objectives

Disadvantages of Franchising to the franchisor

- Failure of the franchisee to operate the franchise properly - Disputes with and lawsuits by franchisees over the terms of the franchise contract • National Franchise Mediation Program was established to arbitrate disputes between franchisors and franchisees

Advantages of Franchising to the franchisor

- Fast and well-controlled distribution of its products without incurring the high cost of constructing and operating its own outlets - Can ensure that outlets are maintained and operated according to its own standards - Franchisee is likely to be very highly motivated to succeed, which translates into more sales and thus higher royalties for the franchisor

Advantages of Franchising to the franchisee

- Gets the opportunity to start a business with limited capital and to make use of the business experience of others - Receives advice from the franchisor, often free of charge - Receives materials to use in local advertising and can take part in national promotional campaigns sponsored by the franchisor

Global Perspectives in Small Business

- Globalization and instant worldwide communications are rapidly shrinking distances between customers - Technology now gives small businesses the leverage and power to reach markets that were once limited solely to large corporations. - The SBA offers help to the nation's small-business owners who want to enter the world market: 1. U.S. Export Assistance Centers 2. SBS International Trade Loan program 3. U.S. Commercial Service

Industries That Attract Small Businesses

- Industries that require only a low initial investment and some special skills or knowledge tend to attract new businesses. - Knowledgeable entrepreneurs choose areas with which they are familiar, and these are most often the more established industries.

Why Some Entrepreneurs and Small Businesses Fail

- Lack of capital and cash-flow problems - Lack of management skills - Over-expansion

The Small-Business Sector

- Out of the 28.8 million businesses in the United States, only 18,600 of these employ more than 500 workers— enough to be considered large. - During the last decade, the number of small businesses in the United States has increased 49 percent.

Advantages of Small Businesses

- Personal relationships with customers and employees - Ability to adapt to change - Simplified record keeping - Independence - Profit retention - Ease and low cost of going into (or out of) business

Strategic Plans

Broad Guide for major policy setting - Designed to achieve long term goals -Set by board of directors and top management

Types of Plans

Strategic Tactical Operational Contingency

Mission

a statement of the basic purpose that makes an organization different from others

Small-business development centers (SBDCs)

university-based groups that provide individual counseling and practical training to owners of small businesses

Planning

establishing organizational goals and deciding how to accomplish them

Contingency plans

- Outline of alternative courses of action if other plans are disrupted or noneffective - Used in conjunction with strategic, tactical and operational plans

Importance of Small Businesses in Our Economy

- Providing Technical Innovation - Providing Employment - Providing Competition - Filling Needs of Society and Other Businesses

Disadvantages of Small Businesses

- Risk of failure - Limited potential - Limited ability to raise capital

Disadvantages of Franchising to the franchisee

- The amount of control retained by the franchisor - Franchisors opening competing franchises within the franchisee's market

Generating alternatives

- The more important the decision, the more attention must be devoted to this stage. - Certain techniques can aid in the generation of creative alternatives. • Brainstorming • "Blast! Then Refine" • Trial and error

Method for managers to solve problems

- identify the problem or opportunity - generate alternatives - selecting an alternative - implementing and evaluating the solution

Management - the process of coordinating people and other resources to achieve the goals of an organization

- the process of coordinating people and other resources to achieve the goals of an organization

Franchising arrangements fall into three general categories:

1. A manufacturer authorizes a number of retail stores to sell a certain brand-name item. 2. A producer licenses distributors to sell a given product to retailers. - Most commonly found in the soft drink industry 3. A franchisor supplies brand names, techniques, or other services instead of a complete product. - Used by travel-related companies (Avis, Hampton Hotels) and restaurants (McDonald's, SUBWAY)

A business plan has three basic purposes:

1. Communication - A business plan serves as a concise document that potential investors examine to see if they would like to invest or assist in financing a new venture. 2. Management - A business plan helps to track, monitor, and evaluate the progress. - It serves to establish time lines and milestones and allows comparison of growth projections against actual accomplishments. 3. Planning- The business plan guides a businessperson through the various phases of business.

Participative leadership can be classified into three groups:

1. Consultative leaders - discuss issues with workers but retain the final authority for decision making 2. Consensus leaders - seek input from almost all workers and make final decisions based on their support 3. Democratic leaders - give final authority to the group

The control function includes three steps

1. Setting standards - Example: Southwest Airlines establishes a goal of increasing profits by 12 percent. 2. Measuring actual performance - Example: Southwest's management will monitor its profit on a monthly basis to ensure success. 3. Taking corrective action - Example: After three months, Southwest's management finds that profit has increased only 1 percent; thus, corrective action will be needed to get the firm back on track.

Are Franchises Successful?

1. The success rate for businesses owned and operated by franchises is significantly higher than the success rate for other independently owned small businesses. 2. However, franchising is not a guarantee of success for either franchisees or franchisors. - Too rapid expansion, inadequate capital or management skills, and a host of other problems can cause failure for both franchisee and franchisor.

Although many factors influence the effectiveness of a TQM program, two issues are crucial.

1. Top management must make a strong commitment to a TQM program by treating quality improvement as a top priority and giving it frequent attention. 2. Management must coordinate the specific elements of a TQM program so that they work in harmony with each other.

The business plan should answer four questions:

1. What exactly is the nature and mission of the new venture? 2. Why is this enterprise a good idea? 3. What are the businessperson's goals? 4. How much will the new venture cost?

Selecting an Alternative

Final decisions are influenced by a number of considerations, including: • Financial constraints-Human and informational resources-Time limits-Legal obstacles-Political factors - Managers must select the alternative that will be most effective and practical. - When lacking time or information, managers often "satisfice"—choose solutions that are only adequate and not ideal.

optimization

Goals in different departments and at different levels may conflict—it is the manager's job to achieve balance.

Implementing and Evaluating the Solution

If the alternative that was chosen removes the difference between the actual condition and the desired condition, the decision is considered effective. - If the problem still exists, managers may: • Decide to give the chosen alternative more time to work. • Adopt a different alternative. • Start the problem identification process all over again. - Managers should be aware that failure to evaluate decisions adequately may have negative consequences.

Most organizations make use of four kinds of resources

Material Human Financial Informational

Management Process

Planning Organizing Leading and Motivating Controlling* *Review and modify back to planning, loop.

Small-business institutes (SBIs)

groups of senior and graduate students in business administration who provide management counseling to small businesses

Tactical Plans

Smaller Scale plan to implement strategic plan - May be updated periodically - Easier to change that strategic plans

Organizing

The grouping of resources and activities to accomplish some end result in an efficient and effective manner

Kinds of managers

Top managers- Set objectives, scan environment and plan and make decisions (President, CEO) Middle Managers- Report to top management, oversee first line managers, develop and implement activities and allocate resources (Division/plant manager) First line managers- Report to middle managers, supervise employees, coordinate activities and are involved in day to day operations (office managers, foreman)

Business plan

a carefully constructed guide for the person starting a business

Small Business Administration (SBA)

a governmental agency that assists, counsels, and protects the interests of small business in the United States • The SBA's Management Assistance includes free individual counseling, courses, conferences, workshops, and a wide range of publications. Management Courses and Workshops • The management courses offered by the SBA cover all the functions, duties, and roles of managers. • Instructors may be teachers from local colleges or universities or other professionals, such as management consultants, bankers, and lawyers.

The SCORE Association

a group of retired businesspeople who volunteer their services to small business through the SBA

Organization

a group of two or more people working together to achieve a common set of goals

Franchise

a license to operate an individually owned business as though it were part of a chain of outlets or stores

Administrative manager

a manager who is not associated with any specific functional area but who provides overall administrative guidance and leadership

Financial manager

a manager who is primarily responsible for an organization's financial resources

Marketing manager

a manager who is responsible for facilitating the exchange of products between an organization and its customers or clients

Operations manager

a manager who manages the systems that convert resources into goods and services

Human resources manager

a person charged with managing an organization's human resources programs

Franchisee

a person or organization purchasing a franchise - Supplies labor and capital - Operates the franchised business - Agrees to abide by the provisions of the franchise agreement

Benchmarking

a process used to evaluate the products, processes, or management practices of another organization that is superior in some way in order to improve quality • The basic steps in benchmarking involve identifying objectives, forming a benchmarking team, collecting and analyzing data, and acting on the results. **This is different than benchmarking companies for comparison**

Goal

an end result that an organization is expected to achieve over a one- to ten-year period - Example: Ulta has a five-year plan to open 100 new stores a year.

Franchisor

an individual or organization granting a franchise • Supplies: § A known and advertised business name § Management skills § The required training and materials § A method of doing business

Plan

an outline of the actions by which an organization intends to accomplish its goals and objectives