BUS101 chapter 7

Chapter 5

Chapter 5

Sole Proprietorship

A business owned, and usually managed, by one person.

LIMITED LIABILITY COMPANIES LLC

Similar to an S corporation, but without the eligibility requirements

MAJOR FORMS of OWNERSHIP

Sole Proprietorship Partnership Corporation

Horizontal Merger

The joining of two firms in the same.

DISADVANTAGES of SOLE PROPRIETORSHIPS

1) Unlimited Liability 2)Limited financial resources 3) Management difficulties 4) Overwhelming time commitment 5) Few fringe benefits 6) Limited growth 7) Limited life span

RATIONAL DECISION-MAKING MODEL

1. Define the situation. 2. Describe and collect needed information. 3. Develop alternatives. 4. Decide which alternative is best. 5. Do what is indicated. 6. Determine whether the decision was a good one and follow up.

DISADVANTAGES of FRANCHISING

1. Large start-up costs 2. Shared profit 3. Management regulation 4. Coattail effects 5. Restrictions on selling 6. Fraudulent franchisors

Advantages of LLCs:

1. Limited liability 2. Choice of taxation 3. Flexible ownership rules 4. Flexible distribution of profits and losses 5. Operating flexibility

Disadvantage

1. No stock, therefore ownership is nontransferable 2. Limited life span 3. Fewer incentives 4. Taxes 5. Paperwork

SWOT MATRIX

14

HOW OWNERS AFFECT MANAGEMENT

15

PLANNING FUNCTIONS

15

FOUR FUNCTIONS of MANAGEMENT

2

LEVELS of MANAGEMENT

21

SKILLS NEEDED at VARIOUS LEVELS of MANAGEMENT

25

VARIOUS LEADERSHIP STYLES

33

FIVE STEPS of CONTROLLING

38

FORMS of BUSINESS OWNERSHIP

5

Corporation

A legal entity with authority to act and have liability apart from its owners.

Limited Partnership

A partnership with one or more general partners and one or more limited partners.

Master Limited Partnership

A partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax.

Conventional (C) Corporation

A state- chartered legal entity with authority to act and have liability separate from its owners (its stockholders).

S CORPORATIONS

A unique government creation that looks like a corporation, but is taxed like sole proprietorships and partnerships. • S corporations have shareholders, directors and employees, plus the benefit of limited liability. • Profits are taxed only as the personal income of the shareholder.

General Partnership

All owners share in operating the business and in assuming liability for the business's debts.

Franchise Agreement

An arrangement whereby someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory. • More than 770,000 franchised businesses operate in the U.S., employing approximately 8.5 million people.

Leveraged Buyout (LBO)

An attempt by employees, management or a group of investors to buy out the stockholders in a company. • LBOs have ranged in size from $50 million to $34 billion and have involved everything from small businesses to giant corporations. • In 2012, foreign investors poured $166 billion into U.S. companies.

General Partner

An owner (partner) who has unlimited liability and is active in managing the firm.

Limited Partner

An owner who invests money in the business, but enjoys limited liability. Limited Liability means that liability for the debts of the business is limited to the amount the limited partner puts into the company; personal assets are not at risk.

(Unlimited Liability)

Any debts or damages incurred by the business are your debts, even if it means selling your home, car or anything else.

LEADERSHIP STYLES

Autocratic Leadership Participative or Democratic Leadership Free-Rein Leadership

BACK to SCHOOL for TOP MANAGERS

Business leaders need to study international political, legal, and regulatory systems. • Each local market requires their own set of global standards. • Some companies, like Coca-Cola, Nestle, and IBM have done a noteworthy job of assessing and understanding global challenges.

COOPERATIVES

Businesses owned and controlled by the people who use them- producers, consumers, or workers with similar needs who pool their resources for mutual gain. • Worldwide, co-ops serve one billion members! • Members democratically control the business by electing a board of directors that hires professional management.

GLOBAL FRANCHISING

Canada is the most popular target for U.S.-based franchises. • China, South Africa, the Philippines and the Middle East are becoming popular despite high cost. • International franchising goes both ways - some foreign franchises have come to the U.S.

TOP MANAGEMENT

Chief Executive Officer (CEO) Introduces change into an organization. Chief Operating Officer (COO) Implements CEO's changes. Chief Financial Officer (CFO) Obtains funds, plans budgets, collects funds, etc. Chief Information Officer (CIO) Gets the right information to the right people so decisions can be made.

Decision Making

Choosing among two or more alternatives.

MEASURING SUCCESS( External Customers)

Dealers, who buy products to sell to others, and ultimate customers (or end users), who buy products for their own use.

ARE YOU a MICROMANAGER?

Do you have strategic initiatives that you have not addressed? • Do you often check on employees for quality control? • Do you often check on subordinates throughout the day? • Do you rarely take vacations? • Is there a lot of turnover?

STAFFING is TRICKY BUSINESS Six Sins of Staffing

Don't hire someone because someone else says so. 2. Don't get caught up in applicants' appearances. 3. Don't give someone the wrong job. 4. Don't forget about feedback. 5. Don't give promotions just because it's time. 6. Don't cheat your employees.

STRATEGIC and TACTICAL PLANNING ( Strategic Planning)

Done by top management and determines the major goals of the organization and the policies, procedures, strategies and resources it will need to achieve them.

MAJOR BENEFITS of SOLE PROPRIETORSHIP

Ease of starting and ending the business Being your own boss Pride of ownership Leaving a legacy Retention of company profit No special taxes

MANAGING KNOWLEDGE

Finding the right information, keeping the information in a readily accessible place and making the information known to everyone in the firm. • Tries to keep people from reinventing the wheel.

TYPES OF PARTNERS

General Partner Limited Partner Master Limited Partnership Limited Liability Partnership

MAJOR TYPES of PARTNERSHIPS

General Partnership Limited Partnership

WHO CAN FORM LO 4-3 S CORPORATIONS? Qualifications for S Corporations:

Have no more than 100 shareholders. Have shareholders that are individuals or estates and are citizens or permanent residents of the U.S. Have only one class of stock. Derive no more than 25% of income from passive sources. If an S corporation loses its S status, it may not operate under it again for at least 5 years.

PLANNING ANSWERS FUNDAMENTAL QUESTIONS

How can we get to our goal from here? Strategic planning Tactical planning Operational planning Contingency planning

Middle Management

Includes general managers, division managers, and branch and plant managers who are responsible for tactical planning and controlling.

MEASURING SUCCESS (Internal Customers)

Individuals and units within the firm that receive services from other individuals or units.

Whom should a manager thank?

Interns - Doing lots of work for little money, they are the future of the company and industry. Lawyers - Many do pro bono work, even for nonprofit companies. The little people - Mailroom, repair, and cleaning staff keep the office running day-to-day.

HOME-BASED FRANCHISES(Main Disadvantages)

Isolation Long hours

WHAT MAKES a GREAT CEO Decision Making Skills of Top CEOs

Keep global business issues in mind and be a citizen of the world. • Identify and manage risks before they grow. • Change strategies and models with the times. • Skillfully manage relationships with governments as government involvement rises.

LEADERSHIP

Leaders must: - Communicate a vision and rally others around that vision. - Establish corporate values. - Promote corporate ethics. - Embrace change. - Stress accountability and responsibility.

Limited Liability Partnership

Limits partners' risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their supervision.

Autocratic Leadership

Making managerial decisions without consulting others.

ADVANTAGES of FRANCHISING

Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate

Participative or Democratic Leadership

Managers and employees work together to make decisions.

Free-Rein Leadership

Managers set objectives and employees are free to do whatever is appropriate to accomplish those objectives.

USING SOCIAL MEDIA DURING the WORST of TIMES

Many companies use sites like Twitter and Facebook to proactively and reactively communicate with their customers. • When GM was going through a massive recall, CEO, Mary Barra, insisted on using social media. • Complaints were quickly read, responded to, and resolved.

DEFINING THE MISSION

Mission Statement -- Outlines the organization's fundamental purposes. It includes: - the organization's self-concept - its philosophy - long-term survival needs - customer needs - social responsibility - nature of the product or service

SHARING the VISION

More than a goal, it's a broad explanation of why the organization exists and where it's trying to go.

Merger and Acquisition (Acquisition)

One company's purchase of the property and obligations of another company.

EMPOWERMENT

Progressive leaders give employees the authority to make decisions on their own without consulting a manager. • Customer needs are handled quickly. • Manager's role becomes less of a boss and more of a coach. • Enabling -- Giving workers the education and tools they need to make decisions.

STAFFING

Recruiting, hiring, motivating and retaining the best people available to accomplish the company's objectives. • Recruiting good employees is critical. • Many people are not willing to work at companies unless they are treated well with fair pay.

HOME-BASED FRANCHISES(Advantages)

Relief from commuting stress Extra family time Low overhead expenses

THANK YOU The Most Basic Human Relations Skill

Saying "thank you" has led to happier employees and greater profits for companies.

Objectives

Specific, short- term statements detailing how to achieve the organization's goals.

MANAGERIAL SKILLS

Technical Skills -- The ability to perform tasks in a specific discipline or department. • Human Relations Skills -- Skills that involve communication and motivation; they enable managers to work through and with people. • Conceptual Skills -- Skills that involve the ability to picture the organization as a whole and the relationship among its various parts.

SETTING GOALS

The broad, long-term accomplishments an organization wishes to attain.

Top Management

The highest level, consists of the president and other key company executives who develop strategic plans.

Conglomerate Merger

The joining of firms in completely unrelated industries.

Vertical Merger

The joining of two firms in different stages of related businesses.

ACCOUNTABILITY through TRANSPARENCY

The presentation of the company's facts and figures in a way that is clear and apparent to all stakeholders.

OPERATIONAL and CONTINGENCY PLANNING( Contingency Planning)

The process of preparing alternative courses of action the firm can use if its primary plans don't work out.

STRATEGIC and TACTICAL PLANNING Tactical Planning

The process of developing detailed, short-term statements about what is to be done, who is to do it and how.

OPERATIONAL and CONTINGENCY PLANNING( Operational Planning)

The process of setting work standards and schedules necessary to implement the company's tactical objectives.

PROBLEM SOLVING

The process of solving the everyday problems that occur; less formal than decision making and needs quicker action. • Problem-solving techniques include brainstorming and PMI -- Listing all the pluses for a solution in one column, all the minuses in another and the implications in a third.

WHAT IS MANAGEMENT?

The process used to accomplish organizational goals through planning, organizing, leading and controlling people and other organizational resources.

Merger and Acquisition (Merger)

The result of two firms joining to form one company.

Supervisory Management

Those directly responsible for supervising workers and evaluating daily performance.

MEASURING SUCCESS

Traditional forms of measuring success are financial. • Pleasing employees, stakeholders and customers is important.

Partnership

Two or more people legally agree to become co-owners of a business.

TYPES of MERGERS

Vertical Merger Horizontal Merger Conglomerate Merger

PLANNING ANSWERS FUNDAMENTAL QUESTIONS

What is the situation now? SWOT Analysis -- Analyzes the organization's Strengths, Weaknesses, Opportunities and Threats.

TODAY'S MANAGERSTODAY'S MANAGERS

Younger and more progressive. Growing numbers of women. Fewer from elite universities. Emphasis is on teams and team building. Managers need to be skilled communicators and team players.

DISADVANTAGES of CORPORATIONS

• Anyone - truckers, doctors, plumbers, athletes and small business owners can incorporate. • Normally stock is not issued to outsiders when individuals incorporate, so the advantages and disadvantages are not exactly the same as for large corporations. • Major advantages are limited liability and possible tax benefits.

MINORITY-OWNED FRANCHISES

• DiversityFran is an initiative to build awareness of franchising opportunities within minority communities. • DominoDomino'Domino's Pizza launched a minority franchise recruitment program called Delivering the Dream. • Over 20% of franchises are minority-owned.

DISADVANTAGES of CORPORATIONS

• Initial cost • Extensive paperwork • Double taxation • Two tax returns • Size • Difficulty of termination • Possible conflict with stockholders and board of directors

ADVANTAGES of CORPORATIONS

• Limited liability • Ability to raise more money for investment • Size • Perpetual life • Ease of ownership change • Ease of attracting talented employees • Separation of ownership from management

WORK SMARTER How to Ease Pressure on Workers

• Manage output instead of hours. • Train workers to be ready for a more complex corporate structure. • Allow lower-level managers to make decisions. • Use new technology to foster teamwork. • Shift hiring emphasis to collaboration.

ADVANTAGES of PARTNERSHIPS

• More financial resources • Shared management and pooled/complement ary skills and knowledge • Longer survival • No special taxes

E-COMMERCE in FRANCHISHING

• 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. • Other franchises are solely based online.

DISADVANTAGES of PARTNERSHIPS

• Unlimited liability • Division of profits • Disagreements among partners • Difficult to terminate

WOMEN in FRANCHISING

• Women own about half of U.S. companies, yet ownership of franchises is about 21%. • More women are becoming franchisors. Auntie AnneMore women are becoming franchisors. Auntie Anne'More women are becoming franchisors. Auntie