UO BA 101 Midterm 3 Key Terms
the buying of permanent property and businesses in foreign nations most common type is foreign subsidiaries
Foreign Direct Investment
a company owned in a foreign country by another company, called the parent company primary advantage: parent company maintains complete control over its tech or expertise primary disadvantage: must commit funds and technology within foreign boundaries
Foreign Subsidiaries
Canada is the most popular target for U.S.-based franchises. Franchisors are finding it easier now to move into China, South Africa, the Philippines, and the Middle East because of expanding market.
Franchising in Global Markets
opportunity, pressure, rationalization A deliberate deception to secure unfair or unlawful gain
Fraud Triangle
-Corporations are no longer simply 'profit-machines'. Which means that -Corporations cannot be thought of as being responsible to only one group, but must be seen to bear responsibilities to all of the individuals their activities affect, and upon whom their existence depends.
Freeman Stakeholder Theory
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law
Friedman Doctrine
-Brazil wealthier by 2030 -Russia is a large oil producing country and draws interest -India has growth in IT, pharmaceuticals, and biotech -China has >1.3B people and many multinationals invest heavily there
Future of Global Trade
leadership style that involves making managerial decisions without consulting others
autocratic leadership
blame for unethical behavior rests on couple of individuals vs people are not inherently ethical/unethical but are influenced by the corporate culture surrounding them
bad apple vs bad barrel
the difference between the flow of money into and out of a country
balance of payments
the difference between a country's total exports and total imports
balance of trade
occurs when one party fails to live up to the terms of a contract
breach of contract
outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses
business model
A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s). pick a bank of similar size, prepare financial statements, be very specific with loan ask
business plan
David Ricardo, comparative advantage
19th century economist _______ discovered the guiding principle of ___________ that the supported the idea of free economic exchange
franchises and cooperatives
2 special forms of business ownership
1. It is not about the law 2. Organizational policies and procedures 3. The moral stance employees take when faced with decisions not governed by formal rules
3 Levels of Ethical Standards
1. Off the clock ex. not working but asks you to stay late 2. Dumpster Diving ex: boss asks you to check public dump for competitors stuff 3. Safety issues on the production line ex: don't tell employees about dangers of product line
3 situations as an employee:
A. Off the clock B. Dumpster Diving C. Safety issues on the production lines
3 situations as an manager:
1. Customer Segments 2. Value Propositions 3. Channels 4. Customer Relationships 5. Revenue Streams 6. Key Resources 7. Key Activities 8. Key Partnerships 9. Cost Structure
9 building blocks of business model canvas
operating flexibility: don't have to submit articles of organization or hold annual meetings
Advantage of LLC
1. limited liability 2. perpetual life 3. ease of transfer of ownership 4. ability to raise large amounts of financial capital 5. ease of attracting talented employees 6. size
Advantages of C Corporations
1. longer survival (partners keep each other disciplined) 2. increased financial resources 3. shared management 4. no special taxes
Advantages of Partnerships
ease of formation, be your own boss, retention of control, pride of ownership, leaving a legacy, retention of profits, no special taxes
Advantages of Sole Proprietorship
confidential, faster, less expensive arbitration: binding or non-binding and mediation: (meeting) non-binding... always
Alternative Dispute Resolution (instead of courts)
wealthy individuals who invest in start-up companies with high growth potential in exchange for a share of ownership -Fastest growing segment of the small business capital market -ideal source of financing for companies that have outgrown the capacity of friends and family
Angel Investors
designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition
Antidumping Policies
-sustainable future objective -3500+ worldwide -Patagonia is an example -certified to meet rigorous standards of social and environmental performance, accountability, and transparency.
B Corporations, Benefit Corporations and Social Purpose Corporations
a legal process in which a person or business declares the inability to repay debts -relieved of obligation by court who divides remaining assets among creditors
Bankruptcy
-passed to decrease the number of bankruptcy filings and eliminate the ease of filing. -makes it difficult for people of high income to escape large credit card debt
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Central American Free Trade Agreement Free-trade zone among U.S., Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua
CAFTA
1) in writing 2) specifies mutual consideration 3) contains clear offer & agreement
Contracts do not need to be complex if: (3 things)
a state-chartered legal entity with authority to act and have liability separate from its owners -stockholders not liable beyond investment
Conventional (C) Corporation
a business's concern for society's welfare -based on commitment to integrity, fairness, and respect -some disagree w/ this because it might sacrifice building wealth for owners
Corporate Social Responsibility (CSR)
government withdrawal of certain laws and regulations that seem to hinder competition
Deregulation
1. Unlimited liability 2. Division of profits 3. Disagreements among partners
Disadvantages of Partnerships
unlimited liability: responsible for all the debts of the business limited resources, management difficulties, overwhelming time commitment, limited growth
Disadvantages of Sole Proprietorships
1. Initial cost (1000s of $) 2. Extensive paperwork 3. Double taxation (corporate and income) 4. Two tax returns 5. Size ( a + and -) 6. Difficulty of termination 7. Possible conflict with stockholders and board of directors
Disadvantages of a corporations
a law enacted in the aftermath of the financial crisis of 2008 1. Comprehensive regulation of financial markets 2. The consolidation of regulatory agencies 3. Consumer protection reforms 4. Tightened regulation of Credit Rating Agencies
Dodd-Frank Act
-Most brick-and-mortar franchises have expanded online. -Many franchisors prohibit franchisee-sponsored sites because conflicts can erupt. -Sometimes "reverse royalties" are sent to franchisees who believe their sales were hurt by the franchisor's site.
E-Commerce in Franchising
legal purpose, consideration, voluntary agreement
Elements of a Contract
- Enron avoided paying any tax despite earning billions of dollars in declared profits
Enron's Culture of Deceit
Accepting the risk of starting and running a business.
Entrepreneurship
believing in the superiority of one's own ethnic and cultural group, and having a corresponding disdain for all other groups US businesspeople are often accused of this
Ethnocentric
provide hands-on exporting assistance and trade-finance support for small and medium-sized businesses that wish to directly export goods and services
Export Assistance Centers (EACs)
the process of determining if a business idea is viable -not same as a business plan - serves as a filter, screening out ideas that lack potential for building successful business -investigative tool
Feasibility Analysis
a federal agency empowered to prevent persons or corporations from using unfair methods of competition in commerce (false and deceptive advertising & promotion) ex: making fast food burger look delicious
Federal Trade Commission (FTC)
1. Capital Requirements -Must have an estimate of how much start-up capital is required to launch the business 2. Estimated Earnings - Forecasted income statements 3. Return on Investment - Combining the previous two estimates to determine how much investors can expect their investments to return
Financial Feasibility Analysis
• Projected financial statements (monthly for 1 year/quarterly for the next 2 years) • Income statement • Balance sheet • Cash Flow • Capital expenditures
Financial Forecasts
accountants
Good _______ are essential for focus on sales/expenses/profits
-Manage money (monetary policy) -Take money out of markets (taxing consumers -Put money into markets (government spending) -Regulate industries (administrative law)
Governments other roles
- big oil/steel/railroad companies run US economy - fear they would monopolize market & raise prices - Sherman Antitrust Act of 1890 passed
History of Antitrust Legislation
1. hire people w/ good ethics 2. build organizational culture w/ great ethical behavior 3. leaders articulate & act in ethical manner 4. decision making process that requires good ethics 5. use ethics officers
How to behave ethically:
serve apprenticeship (training period), ask to become assistant manager. Then learn EVERYTHING about the business and after 2 years try to take over management through a profit-sharing plan.
How to take over a successful firm
the first time a company issues stock that may be bought by the general public -"going public" -few companies with annual sales below $25 million make IPOs
Initial Public Offering (IPO)
• New value • Different value • Combining resources in a more productive way
Innovation is about making a meaningful "contribution" through:
maintains order in the international monetary system
International Monetary Fund (IMF)
someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization's resources to try to realize it "inside entrepreneur"
Intrapreneur
1. Right to safety 2. Right to be informed 3. Right to choose 4. Right to be heard
Kennedy's Basic Rights of Consumers
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Leveraged Buyout (LBO)
When a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty). not much extra cost for licensors for marketing/production
Licensing
a form of business ownership that offers both limited liability to its owners and flexible tax treatment similar to S Corp, but w/o special eligibility requirements
Limited Liability Company (LLC)
separation of ownership from management. can raise money from stockholders. owners --> board of directors --> officers --> managers --> employees
Main advantage of C Corporations
difficulty of termination. partnerships can be very difficult, especially in terms of law, to put to an end.
Main disadvantage of Partnerships
Plan the business, finance the business, know your customers (marketing), manage employees (HR), keep records (accounting) first two are primary concerns
Managing a small business
entrepreneurs willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle -many are homebased >1/2 small businesses ran from home
Micropreneurs
Allows open trade between the US, Mexico, and Canada.
NAFTA (North American Free Trade Agreement)
-Monitor trends and exploit them early -Take a different approach to an existing market -Put a new twist on an old idea -Notice what is missing
Name some entrepreneurial opportunities:
• Utilitarian and Kantian Ethics: The moral worth of actions is determined by its consequences; minimization of harm. • Rights Theories: Recognizes that human beings have fundamental rights and privileges. • Justice Theories: Focus on the attainment of a just distribution of economic goods and services that is considered to be fair and equitable.
Other ethical philosophical approaches:
A decision by a corporation to turn over much of the responsibility for production (or other things) to independent suppliers.
Outsourcing
1. specific performance: party who violated may be required to live up to agreement 2. payment of damages: if you break it, you can be sued for damages. ex: contract w/ wedding singer who doesn't show up. I can sue them. 3. discharge of obligation: If I don't live up to my part, you can agree to drop the matter and not do your part
Possible consequences of breach of contract
1. Acquire New Customers 2. Retain Existing Customers 3. Upsell to existing customers
Purpose of CRM (Customer Relationship Management)
1) top management (pres/vice pres) 2) middle management (division heads/branch managers) 3) supervising management (supervisors/department heads) 4) nonsupervisory (employees)
Pyramid of management:
1. Opportunity: American Dream, lack of skills but have inner drive 2. Profit: obtainable 3. Independence: own boss, freedom to make important decisions 4. Challenge: moderate, calculated risks seek achievement, not power
Reasons to take entrepreneurial risk
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships profits taxed as income of shareholders
S corporation
A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate. -prevents falsified financial statements -
Sarbanes-Oxley Act (2002) (Public Company Accounting Reform)
allows the government to break up companies with control of a market; prevents monopolies 1) forbids contacts in restraint of trade 2) forbids creation of monopolies or attempt to monopolize market
Sherman Antitrust Act (1890)
A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.
Small Business Administration (SBA)
A management function that includes hiring, motivating, and retaining the best people available to accomplish the company's objectives
Staffing
law created by legislative bodies in contrast to law generated by judicial opinions (case law) and administrative bodies (administrative law) -written law
Statuory Law
consists in the purposeful and organized search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation Many successful innovations exploit change
Systematic innovation
A tax on imported goods
Tariff
a hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than to those over the quota
Tariff Rate Quota
the ability to perform tasks in a specific discipline or department Ex: selling product or developing software Ex2: marketing or information systems
Techical skills
franchisors often use technology, including social media, to extend their brands and meet the needs of both their customers and their franchisees.
Technology in Franchising
-protects whistleblowers by requiring all public corporations to allow employee concerns about accounting and auditing to be submitted confidentially and anonymously
The Sarbanes-Oxley Act...
people, planet, profit sustainable businesses strive to meet this.
Triple Bottom Line
real (real estate), personal (everything else tangible or intangible), intellectual (property generated by creative activities such as music, art, or software)
Types of Property
-tactical -operational -contingency
Types of Strategies:
(1) sole proprietorships, (2) partnerships, and (3) corporations.
Types of businesses
strategic: broad long-term goals set by top managers tactical: specific short-term objectives set by lower level managers operational: work schedules/standards contingency: backup plans if primary fail
Types of planning:
A comprehensive commercial law adopted by every state in the United States that covers sales laws and other commercial laws. -simplifies interstate commercial transactions
Uniform Commercial Code (UCC) 1952
an organization of independent states formed in 1945 to promote international peace and security -develops friendly relations -solves international problems -promotes respect for human rights
United Nations (UN)
Managers focus on producing order and stability while leaders focus on creating a vision for others to follow management is carrying out leaders vision
What do managers focus on? What do leaders focus on?
an employee who exposes unethical or illegal conduct within the federal government or one of its contractors
Whistleblower
an international bank that offers low-interest loans, advice, and information to developing nations -promotes economic development
World Bank
a permanent global institution to promote international trade and to settle international trade disputes
World Trade Organization (WTO)
One company's purchase of the property and obligations of another company.
acquisition
A federal or state government agency created by the legislature to perform a specific function within area of authority
administrative agency
1. Management and marketing assistance 2. Personal ownership 3. Nationally recognized name 4. Financial advice and assistance 5. Lower failure rate
advantages of a franchise
a regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange ex: European Union
common market (trading bloc)
ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers
compliance based ethics
a social movement that seeks to increase and strengthen the rights and powers of buyers in relation to sellers -people get fair share/equitable treatment -Sarbanes-Oxley Act
consumerism
to be legal, they must have a contractual relationship -18+ -mentally stable -not intoxicated -not under stress or coercion
contactual capacity
a legally enforceable agreement between 2+ parties
contract
specifies what constitutes a legally enforceable agreement
contract law
a foreign company's production of private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing Ex: Foxconn produces Apple Computer chips
contract manufacturing
1. setting standards 2. measuring actual performance 3. taking corrective action
control function
a business owned and controlled by the people who use it - producers, consumers, or workers with similar needs who pool their resources for mutual gain
cooperative (co-op)
similar to a patent, the exclusive legal right given to an originator of materials such as print, publish, perform, film, etc. -filed w/ Library of Congress & last a lifetime
copyright ©
the dimension of social responsibility that refers to the position a firm takes on social and political issues Ex: Patagonia helps environment through business
corporate policy
the dimension of social responsibility that includes everything from hiring minority workers to making safe products -important for global business; treating workers well
corporate responsibility
raising money for a project or venture by obtaining many small amounts of money from many people ex: kickstarter
crowdfunding
inviting broad communities of people - customers, employees, independent scientists and researchers, and even the public at large - into the new product innovation process
crowdsourcing
Choosing among two or more alternatives. heart of all management functions
decision making
telling others how to meet goals/objectives of organization
directing
1.Large start-up costs 2.Shared profit 3.Management regulation 4.Coattail effects 5.Restrictions on selling 6.Fraudulent franchisors
disadvantages of a franchise
selling products in a foreign country at lower prices than those charged in the producing country -way for firms to unload excess production -form of predatory behavior by driving indigenous competitors out of market
dumping
1. self-directed (discipline) 2. self-nurturing 3. action-oriented (dream-->reality) 4. highly energetic 5. tolerant of uncertainty (risk involved, can't be afraid to fail)
entrepreneurial attributes
a group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product
entrepreneurial team
-Represents the personal investment of the owner(s) in the business -Is called risk capital because investors assume the risk of losing their money if the business fails
equity capital
1. is it legal? 2. does good > bad 3. how will it make me feel about my self *Note: ethics start at the top. Managers instill corporate value
ethical dilemma
-self-dealing: managers feather their nest w/ corporate monies (corporate resources for own benefit) -information manipulation: distort or hide info to enhance personal situation -anticompetitive behavior: actions aimed at harming actual or potential competitors -opportunistic exploitation: of other players in the value chain in which the firm is embedded -environment degradation: direct or indirect actions that cause environmental harm
ethical issues
standards of moral behavior, that is, behavior accepted by society as right versus wrong
ethics
The measure of how much one currency is worth in relation to another. high value means dollar is trading for more of other currency
exchange rate
dealers, who buy products to sell to others, and ultimate customers (or end users), who buy products for their own personal use
external customers
A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area
franchise
someone with a good idea for a business (franchiser) sells the rights to use the business name (franchise) and sell a product or service to others in a given territory (franchisees)
franchise agreement
When your profitable franchise fails simply because other franchisees have failed
franchise coattail effect
Persons or companies that hold a franchise.
franchisees
the company that sells/offers a franchise
franchiser
A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor. Ex: Subway, Holiday Inn, KFC
franchising
form of a tort where someone "hurts" another by deception or manipulation
fraud
the movement of goods and services among nations without political or economic barriers
free trade
An owner (partner) who has unlimited liability and is active in managing the firm.
general partner
partnership in which partners share equally in both responsibility and liability
general partnership
The broad, long-term accomplishments an organization wishes to attain.
goals
marketing of a product using unconventional means -find a niche and fill it -connect emotionally with customers -Build a consistent branding strategy -uniqueness -focus on customer
guerilla marketing w/ examples
a limit on the number of products in certain categories that a nation can import
import quota
centers that offer new businesses low-cost offices with basic business services
incubators
an unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends -can serve major sentences for this
insider trading
ethical standards that define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees
integrity based ethics
individuals and units within the firm that receive services from other individuals or units
internal customers
Bernie Madoff. one of largest accounting frauds in history ponzi scheme: the payment of quick returns to the first investors from money invested by later investors.
investment capital manager who committed $64.8 million in fraud (Ponzi scheme)
A partnership in which two or more companies (often from different countries) join to undertake a major project. often government mandated Ex: Disney and Shanghai group put Disneyland in China
joint venture
That department of government which administers the law relating to civil/criminal/business justice.
judiciary
finding the right information, keeping the information in a readily accessible place, and making the information known to everyone in the firm
knowledge management
an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment
limited partner
A partnership with one or more general partners and one or more limited partners.
limited partnership
the process used to accomplish organizational goals through planning, organizing, leading, and controlling people and other organizational resources
management
Combination of two or more companies into a single firm
merger
outline of the fundamental purposes of an organization -self-concept, philosophy, long-term survival needs, customer needs, social responsibility, nature of its products/services
mission statement
designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives
organizing
An organization that manufactures and markets products in many different countries and has multinational stock ownership and management -not all global businesses are multinational -only firms w/ manufacturing capacity or physical presence
multinational corporation
forms of commercial paper (such as checks or CDs) that are transferrable among business/individuals -represent a promise to pay a certain amount
negotiable instrument
short-term statements on how they will achieve the goals
objective
a document granting investors exclusive rights to an invention for 20 years
patent
anticipating future events and determining strategies to achieve organizational objectives in the future
planning
policies: broad guidelines for action strategies: best ways to use resources
policies and strategies
part of tort law that holds businesses liable for harm that results from the production, design, or use of products they market -average case can cost millions of $
product liability
extra profit producers make when supply is artificially limited by an import quota
quota rent
noted by SM, same as trademark except it identifies and distinguishes the source of a service
servicemark
one that is independently owned and operated for profit, not dominant in its field, and meets size standards -room for these in the market
small business
1/3
small business account for ______ of US exports
1) financing can be difficult to find 2) can't get started and/or does not understand cultural differences 3) bureaucratic paperwork can threaten to bury a small business
small business struggle globally because:
a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs -workplace issues such as environment, product safety, community relations, and international relations
social audit
philanthropic (good corporate citizen), ethical, legal, economic
social responsibility pyramid
A business owned by one person easy, quick, simple, & affordable
sole proprietors
A long-term partnership between two or more companies established to help each company build competitive market advantages.
strategic alliance
1. licensing 2. exporting 3. franchising 4. contract manufacturing 5. international joint ventures and strategic alliances 6. foreign direct investment in order from least risk to most risk
strategies for reaching the global market
how the government (fed/state/local) raises $
taxes
highest level of management, consisting of the president and other key company executives who develop strategic plans Ex: CEO, CFO, COO, CIO
top management
a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability. ex: courts struggled with tort law and tobacco companies assault, product liability, fraud
tort
a government order that forbids trade with a specified nation
trade embargo
the use of government regulations to limit the import of goods and services
trade protectionism
A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace.
trade secret
surplus: exports > imports deficit: exports < imports
trade surplus/deficit
A brand that has exclusive legal protection for both its brand name and its design -has TM for unregistered and R for registered -symbols, shapes, colors, and sounds
trademark
(1) general partnerships, (2) limited partnerships, and (3) master limited partnerships.
types of partnerships
1. common: voting rights, residual claims to assets 2. preferred: no vote, first claim on income (a preferred dividend)
types of stock
Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses. -sometimes ask for large stake -often times angel investor or crowdfunding is a better option
venture capitalists
an encompassing explanation of why the organization exists and where it's trying to head
vision
A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.
voluntary export restraint
guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner express: an agreement by a seller to provide repairs or a replacement for a faulty product implied: legal term for the assurance that a product is fit for the purpose intended
warranties (express and implied)
