Exam 1: Module 1 and 2

Double Taxation

(to corporations) Taxed by federal and state government on earnings. Shareholders pay taxes on these dividends.

Organization

A collection of people working together to achieve a common goal.

Agency Problem

A conflict of interest inherent in a relationship in which one party is supposed to act in the best interest of the other.

Leadership

A process involving disproportionate influence over others in pursuit of goals.

Restructuring

Altering existing organizational structures to become more competitive once conditions have changed

Sole Proprietorship

As the owner, you have complete control over the business. All responsibility, all the income. Profits taxed as personal income (no federal/state tax). Disadvantages: Rely on only you and your finances. Unlimited liability - bears losses (debt) and is responsible. Own personal assets at risk.

Disproportionate

At a given time, one person is able to influence others than someone else.

Personal Assistance

Based on human interaction. Customer communicate with representative to get help

Unlimited Liability

Bears losses (debt) and is responsible. (Sole Proprietorship, Partnership)

Reinforcement Theory

Behavior is a function of its consequences. Reward and punishments

Self-fulfilling Prophecy

Behavior is heavily influenced by the expectations of those around us.

Overconfidence Bias

Believe in our ability more than we should

Customer Division

Better serve various categories of customers

Psychological Contract

Between employees and employers. Implicit and infrequently discussed.

Debt

Borrowed funds that must be repaid with interest over a stated time period.

Value Propositions

Bundle of products and services that create value for a specific Customer Segment. Newness; performance; customization; "getting job done"; design; brand/status; price; cost reduction; risk reduction; accessibility; convenience

Partnership

Business owned jointly by 2 or more people. Partnership agreement - specifies everyones rights and responsibilities. Unlimited liability - liable for themselves and other partners.

Positives to Sole Proprietorship

Complete control. Easy and inexpensive to form. Profits of business taxed as personal income.

Big 5 Personality Traits of Leadership

Conscientiousness, emotional stability, extraversion, openness to experience, agreeableness

Dedicated Personal Assistance

Dedicating customer representative to an individual client.

Cost Structure

Describes all costs incurred to operate a business model.

Channels

Describes how a company communicates with and reaches their Customer Segments to deliver a Value Proposition. Owned channels (indirect/direct), Partner Channels (indirect)

Advantages to Partnership

Diverse group. Financing easier. Able to continue if 1 or more partners leave. More resources and talent. Relatively easy and inexpensive to form.

Reciprocal Interdependence

Everyone's outputs become everyone's input, and vice versa. Do things others pay attention to and react to

Commerce

Exchange of goods and services. Interchangeable with business.

Escalation of Commitment

Fear that changing plans will result in a loss of sunk costs and embarrassment for mistake.

Venture Capital

Financing obtained from venture capitalists investment firms that specialize in financing small, high growth companies.

Initial Public Offering

First sale of a company's shares to the public and listing shares on stock exchange. To raise capital.

Focused Low Cost

Focus on a particular buyer segment or geographic segment. Must locate niche market that wants and needs an efficient product and willing to forgo extras to pay a lower price for the product.

Availability Bias

Focus on information that is called to mind more easily

Best-Cost Provider Strategy

Give customers more value for the money by satisfying buyers expectations on key product attributes while beating price expectations.

Licensing

Giving customers permission to use protected intellectual property in exchange for licensing fees.

Brokerage Fees

Intermediation services performed on behalf of 2 or more parties.

Focused Differentiation

Marketing a differentiated product to a narrow market. Makes product less susceptible to cost pressures.

Self-service

No direct relationship with customers. Customers help themselves.

Small Business Administration

Offers sample business plans and online guidance for business plan.

Communities

Online communication - users exchange knowledge to help problems

Optimization and Economy of Scale

Optimize the allocation of resources and activities. Formed to reduce costs - outsourcing, sharing infrastructure

Specialization

Organizing activities into clusters of related tasks that can be handled by certain individuals or groups.

Procedural Justice

Perceived fairness of the process used to determine an outcome

Operations Manager

Person who designs and oversees the transformation of resources into goods and services. Ensure products are high quality.

Finance

Planning for, obtaining, and managing company funds. Very important when first formed in order to borrow money.

Fixed Pricing

Predefined prices based on static variables.

Delegation

Process of entrusting work to subordinates.

Acquisition

Purchase of one company by another. Gain complementary products. To attain new markets or distribution channels. Synergies - whole greater sum of its parts - take advantage of best capabilities.

Acquisition of Particular Resources and Activities

Rely on other firms to furnish particular resources/activities. Motivated by needs to acquire knowledge, licences, access.

Fixed costs

Remain same despite the volume of good/service produced.

Middle Managers

Report to top management and oversee activities of first-line managers. Develop and implement activities and allocate resources to achieve objectives.

Core Competencies

Resources and capabilities that create competitive advantage. Something your company does better than anyone else.

Top Managers

Responsible for the health and performance of organization. Set objectives to direct activities that must be performed to fulfill company's mission. Make and plan important decisions.

Classic Entrepreneurs

Risk-takers who start who start their own companies based on innovative ideas.

Confirmation Bias

Search out and prioritize data that supports our preconceived notions and ignore info that contradicts our choices

Auto-mated services

Sophisticated form of self-service with automated processes.

Niche Markets

Specific, specialized. Supplier-buyer relationships.

Decentralization

Spreads decision-making.

Micropreneurs

Start small and plan to stay small. Start businesses for personal satisfaction and lifestyle.

First-Line Managers

Supervise employees and coordinate activities to make sure that the work performed throughout company with plans of top and middle management.

Managing

Supporting and facilitating individuals working to achieve individual and organizational goals.

Lending/Renting/Leasing

Temporarily granting someone the exclusive right use particular asset for a fixed period of time.

Chain of Command

The authority relationships among people working at different levels of organization. Vertical connecting lines in an organizational chart.

Functional Areas

The divided number of activities needed to operate a business. Ex. management, operations, accounting, finance, marketing

Tall Poppy Syndrome

Those who are envied are "cut down a size" by jealous onlookers.

Multi-sided Platforms

Two or more interdependent Customer Segments.

Limited Partnership

Two types of partners - single general partner who runs business and responsible for liabilities and any number of limited partners with limited involvement and losses limited to investment.

Diversified Markets

Two unrelated customer segments with different needs.

Customer Relationships

Types of relationships a company establishes with specific Customer Segments.

Sequential Interdependence

Unique task is completed by each person specified order using unique inputs and sequence of tasks result in finished product.

Disadvantages to Partnership

Unlimited liability. Share decision making. Share profits. More complex. Potential for conflict between partners. Obtaining financing.

Usage Sale

Use of particular service

Social Facilitation

Used to describe an exaggerate attendance that's examined in a group.

VRIO

Valuable - creates or increases value Rare - not widely possessed Costly to Imitate - difficult to obtain Organized to Capture Value - possessing or obtaining resources/capabilities is not enough

Merger

When 2 companies combine to form a new company.

Strategic Focus

When an organization is very clear about its mission and vision and has a coherent, well-articulated strategy for achieving those.

Influence

When others are willing to allow you to direct their attention and action.

Unity of Command

Who reports to whom

social loafing

the tendency for people in a group to exert less effort when pooling their efforts toward attaining a common goal than when individually accountable

Leadership Effectiveness

1. Achieving (or exceeding) objective performance metrics. 2. Helping individual team members improve skills and abilities. 3. Creating a positive work environment.

Corportation

A legal entity entirely separate from those who own it. When a business reaches a substantial size, move to a corporation for limited liabiltiy.

Strategy

A plan of action that will develop a business's competitive advantage

Cost Leadership/Low Cost

Able to minimize costs in marketing and research and development. Use product price as its competitive edge - minimizing cost to provide acceptable product at lowest possible price.

Hostile Takeover

An act of assuming control that's resisted by the targeted company management and board of directors.

Goal-Setting Theory

An individual's intention to work toward a goal is primary source of motivation.

Dynamic Pricing

Change based on market conditions.

Product Division

Company structured according to its product lines. Own R andD, manufacturing, marking groups to focus all efforts on the products produced by division.

Negatives to Sole Proprietorship

Complete responsibility. Unlimited liability. Obtaining financing may be difficult.

Business Model

Configuration of elements through which a company creates and captures value. Heart of business plan

Economics of Scale

Cost advantages as output expands

Economics of Scope

Cost advantages that a business enjoys due to a larger scope of operations.

Key Partnerships

Describes the network of suppliers and partners that make the business work. Optimization and economy of scale; reduction of risk and uncertainty; acquisition of particular resources and activities.

Organizational Chart

Diagram delineating the interrelationships of positions within an organization

Downsides to Public

Disclosure burden (info that must be made available to the public). Scrutiny of investors or public. Short-term focus.

Mass Markets

Don't distinguish between Customer Segments. Focus on large group with similar needs.

Intrapreneurs

Don't own their own companies but apply their vision, creativity, and risk-taking with a large corporation. Freedom to explore ideas and develop new products with financial backing. High autonomy to run minicompanies within larger enterprise. Less personal risk.

Negatives to Corporations

Double taxation. Expensive and complex to set up. Regulations and oversight.

Perceived Organizational Support

Employee thinks that their company values their work and cares about well-being

Equity Theory

Employee will asses what they are getting from a job and what they're putting in and compare ratio to what others are experiencing. Based on individuals perceptions about how fairly they're treated compared with their coworkers

Matrix Structure

Employees from various functional areas form teams to combine their skills in working on specific project/product

Geographical Division

Enables companies that operate in several locations to be responsive to customers at local level.

Organizational Citizenship Behavior

Engage in activities not required by contribute to workplace

Multipreneurs

Entrepreneurs who start a series of companies. Thrive on challenge of building a business.

Pooled Interdependence

Everyone deals with common resource or input and complete task on their own and then results are added together.

Marketing

Everything a company does to identify customers' needs and design products to meet needs. Develop benefits and features --- price and quality. How to deliver and promote products . Manage relationships with customers - awareness of company.

Cost-driven

Focus on minimizing costs whenever possible. Create and maintain leanest cost structure - low price Value Proposition

Divisional Organization

For large companies - common tasks (legal) at headquarters, each division functions autonomously because more expertise to meet objectives. (+) Enhances ability to respond to changes in firms environment. (-) Higher costs; units focus on own needs

Non-Profit-Corporation

Formed to serve some public purpose rather than for financial gain. Can be exempt from income tax. Tax deductions from contributions.

Departmentalization

Grouping specialized jobs into meaningful units

Competitive Strategy

How will a business do better than rivals

Process Divisions

If goods move through several steps in production

Angel Investors

Individual investors or groups of experienced investors who provide financing for start-up businesses by investing own money, "seed capital"

Shareholders

Invest money into business by buying shares of stock. Portion of corporation owned depends on percentage of stocks held. Elect board of directors who are legally responsible for governing corporation (not daily operations) - oversee policies and decisions, approve shareholders dividends.

Success to Entrepreneurship

Iterating (figuring our what works and makes changes). Think outside the box. Good people (strong team). Sell something customers want. Financial savvy (use as little money to startup). Good timing. Experience

Limited-Liability Corporation

Limited liability and no double tax. Still some circumstances where owner is personally liable.

Public Company

Listed on the public exchange, shares of ownership in the company can easily be bought and sold.

Learned Helplessness

Little control, just give up

Business Types

Manufacturing - create goods Wholesaling - buys from manufacturers, sells to retailers Retailing - sells to customers Service - provide service to consumers

Segmented Markets

Market segments with slightly different needs

Differentiation

Marketing a unique product in a market and price not a significant factor. Product difference based on design, method of distribution, or any aspect that is significant to a consumer. Product must be different enough to charge a higher price.

Accountants

Measure, summarize, and communicate financial and managerial information and advise other managers on financial matters. Financial and managerial accountants

Fundamental Attribution Error

Mistake to that people make when trying to figure out what caused someone to act in a certain way.

Centralization

Most decision making concentrated on top management. (+) Consistency in decision making (-) Low managers feel under-utilized and not developing decision-making skills to be promotable; might delay process if only considering top managers.

Key Resources

Most important assets required to make a business model work. Physical; intellectual; human; financial

Key Activities

Most important things a company must do to make its business model work. Production; problem solving; platform/network

Limited Liability

Not responsible for obligations of corporation, and can lose no more than amount they've personally invested.

Span of Control

Number of people reporting to a particular manager. Flat - new organizations have few layers of management. Taller - adding more layers of management.

Functional Organization

People with comparable skills and perform similar tasks. Small to medium sized companies (group by business functions). (+) Simple and enables specializing in particular areas. (-) Hinder communication and decision making between units.

Interactional Justice

Perceived degree that respect is given.

Distributive Justice

Perceived fairness of an outcome

Management

Planning for, organizing, leading, and controlling a company's resources so that it can achieve its goals.

Value-driven

Premium Value Proposition and high degree if personalized service.

Financial Accountants

Prepare financial statements to help users (inside and outside) asses financial strength of the company.

Managerial Accounting

Prepare information (reports of cost of materials) for internal use only

Stereotypes

Provide shortcuts to making decisions.

Revenue

Represents the funds an enterprise receives in exchange for its goods and services

Subscription

Selling continuous access to a service

Asset Sale

Selling ownership rights to a physical product.

Positives to Corporation

Separate entity. Limited liability. Ease of transferring ownership. Access to financing.

C Corporations

Shareholders --- elect board of directors board of directors --- hire top management

Reduction of Risk and Uncertainty

Strategic alliance in one area and compete in another.

Revenue Streams

The cash a company generates from each Customer Segment (costs subtracted from revenue create earnings)

Customer Segments

The different groups of people or organizations an enterprise aims to reach and serve. Niche markets, mass markets, segmented, diversified, multi-sided platforms.

Entrepreneurs

Those who take risks and reap the rewards associated with starting a new business enterprise. People with vision, drive, and creativity, who are willng to take risk of starting and managing a business to make a profit. Includes most small-business owners.

Stakeholders

Those with legitimate interest in the success or failure of the business and the policies it adapts. Customers, vendors, employees, bankers, landlords. Interest in how the business operates, not all interests are the same.

Formalization

To what degree will there be rules and regulations to direct employees and managers.

Variable Costs

Vary proportionally with volume of goods/services produced.

Expectancy Theory

Way we act depends on what we expect to happen and how much we want an outcome. Probability of an individual acting in a particular way depends on the strength of that individuals beliefs that act will have outcome and on if they value that particular outcome.

Macro-environment

World external to a company over which the business exerts very little control over.

Business Plan

Written description of business's future. Most important steps in forming a business.

Business

any activity that provides goods and services to consumers for purpose of making profit

Motivation

forces within a person that affect the direction, intensity, and persistence of voluntary behavior

Profit

what money is left after paying the bills