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
