UO BA 101 Midterm 3 Key Terms
Ethnocentric
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
bad apple vs bad barrel
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
incubators
centers that offer new businesses low-cost offices with basic business services
Friedman Doctrine
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law
Feasibility Analysis
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
management
the process used to accomplish organizational goals through planning, organizing, leading, and controlling people and other organizational resources
trade protectionism
the use of government regulations to limit the import of goods and services
types of partnerships
(1) general partnerships, (2) limited partnerships, and (3) master limited partnerships.
Types of businesses
(1) sole proprietorships, (2) partnerships, and (3) corporations.
Enron's Culture of Deceit
- Enron avoided paying any tax despite earning billions of dollars in declared profits
History of Antitrust Legislation
- big oil/steel/railroad companies run US economy - fear they would monopolize market & raise prices - Sherman Antitrust Act of 1890 passed
Future of Global Trade
-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
Freeman Stakeholder Theory
-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.
Governments other roles
-Manage money (monetary policy) -Take money out of markets (taxing consumers -Put money into markets (government spending) -Regulate industries (administrative law)
Name some entrepreneurial opportunities:
-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
E-Commerce in Franchising
-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.
equity capital
-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
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
-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
The Sarbanes-Oxley Act...
-protects whistleblowers by requiring all public corporations to allow employee concerns about accounting and auditing to be submitted confidentially and anonymously
ethical issues
-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
B Corporations, Benefit Corporations and Social Purpose Corporations
-sustainable future objective -3500+ worldwide -Patagonia is an example -certified to meet rigorous standards of social and environmental performance, accountability, and transparency.
Types of Strategies:
-tactical -operational -contingency
small business struggle globally because:
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
Contracts do not need to be complex if: (3 things)
1) in writing 2) specifies mutual consideration 3) contains clear offer & agreement
Pyramid of management:
1) top management (pres/vice pres) 2) middle management (division heads/branch managers) 3) supervising management (supervisors/department heads) 4) nonsupervisory (employees)
Purpose of CRM (Customer Relationship Management)
1. Acquire New Customers 2. Retain Existing Customers 3. Upsell to existing customers
Financial Feasibility Analysis
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
9 building blocks of business model canvas
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
Disadvantages of a corporations
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
3 Levels of Ethical Standards
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
advantages of a franchise
1. Management and marketing assistance 2. Personal ownership 3. Nationally recognized name 4. Financial advice and assistance 5. Lower failure rate
3 situations as an employee:
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
Reasons to take entrepreneurial risk
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
Kennedy's Basic Rights of Consumers
1. Right to safety 2. Right to be informed 3. Right to choose 4. Right to be heard
Disadvantages of Partnerships
1. Unlimited liability 2. Division of profits 3. Disagreements among partners
types of stock
1. common: voting rights, residual claims to assets 2. preferred: no vote, first claim on income (a preferred dividend)
How to behave ethically:
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
ethical dilemma
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
strategies for reaching the global market
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
Advantages of C Corporations
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 Partnerships
1. longer survival (partners keep each other disciplined) 2. increased financial resources 3. shared management 4. no special taxes
entrepreneurial attributes
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)
control function
1. setting standards 2. measuring actual performance 3. taking corrective action
Possible consequences of breach of contract
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
disadvantages of a franchise
1.Large start-up costs 2.Shared profit 3.Management regulation 4.Coattail effects 5.Restrictions on selling 6.Fraudulent franchisors
small business account for ______ of US exports
1/3
administrative agency
A federal or state government agency created by the legislature to perform a specific function within area of authority
Small Business Administration (SBA)
A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.
trademark
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
franchise
A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area
sole proprietors
A business owned by one person easy, quick, simple, & affordable
Uniform Commercial Code (UCC) 1952
A comprehensive commercial law adopted by every state in the United States that covers sales laws and other commercial laws. -simplifies interstate commercial transactions
franchising
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
Outsourcing
A decision by a corporation to turn over much of the responsibility for production (or other things) to independent suppliers.
business plan
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
trade secret
A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace.
Sarbanes-Oxley Act (2002) (Public Company Accounting Reform)
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 -
strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Staffing
A management function that includes hiring, motivating, and retaining the best people available to accomplish the company's objectives
joint venture
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
limited partnership
A partnership with one or more general partners and one or more limited partners.
voluntary export restraint
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.
Tariff
A tax on imported goods
S corporation
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships profits taxed as income of shareholders
3 situations as an manager:
A. Off the clock B. Dumpster Diving C. Safety issues on the production lines
Entrepreneurship
Accepting the risk of starting and running a business.
NAFTA (North American Free Trade Agreement)
Allows open trade between the US, Mexico, and Canada.
multinational corporation
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
general partner
An owner (partner) who has unlimited liability and is active in managing the firm.
investment capital manager who committed $64.8 million in fraud (Ponzi scheme)
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.
Franchising in Global Markets
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.
CAFTA
Central American Free Trade Agreement Free-trade zone among U.S., Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua
decision making
Choosing among two or more alternatives. heart of all management functions
merger
Combination of two or more companies into a single firm
19th century economist _______ discovered the guiding principle of ___________ that the supported the idea of free economic exchange
David Ricardo, comparative advantage
venture capitalists
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
What do managers focus on? What do leaders focus on?
Managers focus on producing order and stability while leaders focus on creating a vision for others to follow management is carrying out leaders vision
acquisition
One company's purchase of the property and obligations of another company.
franchisees
Persons or companies that hold a franchise.
Managing a small business
Plan the business, finance the business, know your customers (marketing), manage employees (HR), keep records (accounting) first two are primary concerns
judiciary
That department of government which administers the law relating to civil/criminal/business justice.
goals
The broad, long-term accomplishments an organization wishes to attain.
exchange rate
The measure of how much one currency is worth in relation to another. high value means dollar is trading for more of other currency
Licensing
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
franchise coattail effect
When your profitable franchise fails simply because other franchisees have failed
cooperative (co-op)
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
Corporate Social Responsibility (CSR)
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
Foreign Subsidiaries
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
patent
a document granting investors exclusive rights to an invention for 20 years
Federal Trade Commission (FTC)
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
contract manufacturing
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
Limited Liability Company (LLC)
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
trade embargo
a government order that forbids trade with a specified nation
entrepreneurial team
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
Tariff Rate Quota
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
Dodd-Frank Act
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
Bankruptcy
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
contract
a legally enforceable agreement between 2+ parties
import quota
a limit on the number of products in certain categories that a nation can import
World Trade Organization (WTO)
a permanent global institution to promote international trade and to settle international trade disputes
common market (trading bloc)
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
consumerism
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
Conventional (C) Corporation
a state-chartered legal entity with authority to act and have liability separate from its owners -stockholders not liable beyond investment
social audit
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
tort
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
Good _______ are essential for focus on sales/expenses/profits
accountants
Sherman Antitrust Act (1890)
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
Leveraged Buyout (LBO)
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Whistleblower
an employee who exposes unethical or illegal conduct within the federal government or one of its contractors
vision
an encompassing explanation of why the organization exists and where it's trying to head
World Bank
an international bank that offers low-interest loans, advice, and information to developing nations -promotes economic development
United Nations (UN)
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
limited partner
an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment
insider trading
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
planning
anticipating future events and determining strategies to achieve organizational objectives in the future
Alternative Dispute Resolution (instead of courts)
confidential, faster, less expensive arbitration: binding or non-binding and mediation: (meeting) non-binding... always
Systematic innovation
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
external customers
dealers, who buy products to sell to others, and ultimate customers (or end users), who buy products for their own personal use
Antidumping Policies
designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition
organizing
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
Main disadvantage of Partnerships
difficulty of termination. partnerships can be very difficult, especially in terms of law, to put to an end.
Advantages of Sole Proprietorship
ease of formation, be your own boss, retention of control, pride of ownership, leaving a legacy, retention of profits, no special taxes
Micropreneurs
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
integrity based ethics
ethical standards that define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees
compliance based ethics
ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrongdoers
quota rent
extra profit producers make when supply is artificially limited by an import quota
knowledge management
finding the right information, keeping the information in a readily accessible place, and making the information known to everyone in the firm
fraud
form of a tort where someone "hurts" another by deception or manipulation
negotiable instrument
forms of commercial paper (such as checks or CDs) that are transferrable among business/individuals -represent a promise to pay a certain amount
2 special forms of business ownership
franchises and cooperatives
Technology in Franchising
franchisors often use technology, including social media, to extend their brands and meet the needs of both their customers and their franchisees.
Deregulation
government withdrawal of certain laws and regulations that seem to hinder competition
warranties (express and implied)
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
top management
highest level of management, consisting of the president and other key company executives who develop strategic plans Ex: CEO, CFO, COO, CIO
taxes
how the government (fed/state/local) raises $
internal customers
individuals and units within the firm that receive services from other individuals or units
crowdsourcing
inviting broad communities of people - customers, employees, independent scientists and researchers, and even the public at large - into the new product innovation process
Statuory Law
law created by legislative bodies in contrast to law generated by judicial opinions (case law) and administrative bodies (administrative law) -written law
autocratic leadership
leadership style that involves making managerial decisions without consulting others
Elements of a Contract
legal purpose, consideration, voluntary agreement
International Monetary Fund (IMF)
maintains order in the international monetary system
guerilla marketing w/ examples
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
mission statement
outline of the fundamental purposes of an organization -self-concept, philosophy, long-term survival needs, customer needs, social responsibility, nature of its products/services
servicemark
noted by SM, same as trademark except it identifies and distinguishes the source of a service
breach of contract
occurs when one party fails to live up to the terms of a contract
small business
one that is independently owned and operated for profit, not dominant in its field, and meets size standards -room for these in the market
Advantage of LLC
operating flexibility: don't have to submit articles of organization or hold annual meetings
Fraud Triangle
opportunity, pressure, rationalization A deliberate deception to secure unfair or unlawful gain
business model
outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses
product liability
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 $
general partnership
partnership in which partners share equally in both responsibility and liability
Triple Bottom Line
people, planet, profit sustainable businesses strive to meet this.
social responsibility pyramid
philanthropic (good corporate citizen), ethical, legal, economic
policies and strategies
policies: broad guidelines for action strategies: best ways to use resources
Export Assistance Centers (EACs)
provide hands-on exporting assistance and trade-finance support for small and medium-sized businesses that wish to directly export goods and services
crowdfunding
raising money for a project or venture by obtaining many small amounts of money from many people ex: kickstarter
Types of Property
real (real estate), personal (everything else tangible or intangible), intellectual (property generated by creative activities such as music, art, or software)
dumping
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
Main advantage of C Corporations
separation of ownership from management. can raise money from stockholders. owners --> board of directors --> officers --> managers --> employees
How to take over a successful firm
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.
objective
short-term statements on how they will achieve the goals
copyright ©
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
Intrapreneur
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"
franchise agreement
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)
contract law
specifies what constitutes a legally enforceable agreement
ethics
standards of moral behavior, that is, behavior accepted by society as right versus wrong
Types of planning:
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
trade surplus/deficit
surplus: exports > imports deficit: exports < imports
directing
telling others how to meet goals/objectives of organization
Techical skills
the ability to perform tasks in a specific discipline or department Ex: selling product or developing software Ex2: marketing or information systems
Foreign Direct Investment
the buying of permanent property and businesses in foreign nations most common type is foreign subsidiaries
franchiser
the company that sells/offers a franchise
balance of trade
the difference between a country's total exports and total imports
balance of payments
the difference between the flow of money into and out of a country
corporate responsibility
the dimension of social responsibility that includes everything from hiring minority workers to making safe products -important for global business; treating workers well
corporate policy
the dimension of social responsibility that refers to the position a firm takes on social and political issues Ex: Patagonia helps environment through business
Initial Public Offering (IPO)
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
free trade
the movement of goods and services among nations without political or economic barriers
contactual capacity
to be legal, they must have a contractual relationship -18+ -mentally stable -not intoxicated -not under stress or coercion
Disadvantages of Sole Proprietorships
unlimited liability: responsible for all the debts of the business limited resources, management difficulties, overwhelming time commitment, limited growth
Angel Investors
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
Innovation is about making a meaningful "contribution" through:
• New value • Different value • Combining resources in a more productive way
Financial Forecasts
• Projected financial statements (monthly for 1 year/quarterly for the next 2 years) • Income statement • Balance sheet • Cash Flow • Capital expenditures
Other ethical philosophical approaches:
• 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.