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)