Foundation of Business Ch 4-6

Strategic Tactical Operational Contingency

***What are the 4 types of plans?***

Alien corporation

- A corporation chartered by a foreign government and conducting business in the U.S

Foreign corporation

- A corporation in any state in which it does business except the one in which it is incorporated

Domestic Corporation

- A corporation in the state in which it is incorporated

Corporate ownership: Open corporation

- A corporation whose stock is bought and sold on security exchanges and can be purchased by any individual

Corporate ownership: Closed corporation

- A corporation whose stock is owned by relatively few people and is not sold to the general public

Stockholders' rights: Dividend

- A distribution of earnings to the stockholders of a corporation

Limited Partner

- A person who contributes capital to a business but has no management responsibility or liability for losses beyond the amount he or she invested in the partnership - a business co-owned by one or more general partners who manage the business and limited partners who invest money in it - Master limited BLANK: a business partnership that is owned and managed like a corporation but taxed like a partnership

Cooperate ownership: Stockholder

- A person who owns a corporation's stock

Partnerships

- A voluntary association of two or more persons to act as co- owners of a business for profit -No legal limit on the maximum number of partners; most have only two - Large accounting, law, and advertising partnerships have multiple partners - Partnerships are usually a pooling of special talents or the result of a sole proprietor taking on a partner Dennis, Trevor, VMKS @ Pasadena

Articles of partnership

- An agreement listing and explaining the terms of the partnership; written is preferable to oral Agreement should state - Who will make final decisions - What each partner's duties will be - How much each partner will invest - How much profit or loss each partner receives or is responsible for - How the partnership can be dissolved

S-corporation Advantages

- Avoids double taxation of a corporation - Retains the corporation's legal benefit of limited liability

Limited-liability company (LLC) Advantages

- Avoids double taxation of a corporation - Retains the corporation's legal benefit of limited liability - Provides more management flexibility

Disadvantages of Corporations

- Difficulty and expense of formation - Government regulation and increased paperwork - Conflict within the corporation - Double taxation - Lack of secrecy

Difference between LLC and S-corporation

- LLCs not restricted to 100 stockholders - LLCs have fewer restrictions on who can be a stockholder

Horizontal mergers

- Mergers between firms that make and sell similar products • Subject to approval by federal agencies to protect competition

Vertical mergers

- Mergers between firms that operate at different but related levels of production and marketing of a product • Usually one firm is a supplier or customer of the other

S-corporation Criteria

- No more than 100 stockholders allowed - Stockholders must be individuals, estates, or certain trusts

Stockholders' rights: Common stock

- Stock owned by individuals or firms who may vote on corporate matters but whose claims on profit and assets are subordinate to the claims of others

Stockholders' rights: Preferred stock

- Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common stock owners

Corporate ownership: Stock

- The shares of ownership of a corporation

DISADVANTAGES of Sole Proprietorships

- Unlimited liability • A legal concept that holds a business owner personally responsible for all the debts of the business - Lack of continuity - Lack of money - Limited management skills - Difficulty in hiring employees

Business Plan + What are the 3 basic purposes?

- a carefully constructed guide for starting a business -communication, management, planning

The Corporate Charter: Articles of incorporation

- a contract between the corporation and the state in which the state recognizes the formation of the artificial person that is the corporation and includes: -firm's name and address -incorporators' names and addresses -purpose of the corporation -maximum amount of stock and types of stock to be issued -rights and privileges of stockholders length of time the corporation is to exist

General Partner

- a person who assumes full or shared responsibility for operating a business - a business co-owned by two or more general partners who are liable for everything the business does

Forming a corporation: Where to incorporate

- business can incorporate any state they choose!

ADVANTAGES of Sole Proprietorships

-Ease of start-up and closure -Pride of ownership -Retention of all profits -No special taxes -Flexibility of being your own boss

Corporate Structure

-Stockholders ELECT board of director -board of director APPOINTS executive -executive HIRES employees

sole proprietorship

-a business that is owned (and usually operated) by one person -The simplest form of business ownership and the easiest to start The most popular form of business ownership

Small Business

-one that is independently owned and operated FOR PROFIT and IS NOT dominant in its field

D. Dry cleaning shop

1. Which one of the following would most likely be classified as a service industry? A. Grocery store B. Jewelry store C. Pet shop D. Dry cleaning shop E. Clothing store

Tactical Plan

A SMALLER SCALE plan to implement a strategy

C. university-based group providing individual counseling and practical training to owners of small businesses

A Small Business Institute may be defined as group of retired businesspeople who voluntarily offer their services to small businesses through the SBA. A. group of active managers who voluntarily counsel small-business owners. B. group of senior and graduate students in business administration who provide management counseling to small businesses. C. university-based group providing individual counseling and practical training to owners of small businesses. D. technical publication dealing with hundreds of topics of interest to present and prospective managers of small firms.

horizontal merger

A ____________ is a merger between firms that make and sell similar products or services in similar industries. horizontal merger vertical merger conglomerate merger hostile takeover tender offer

limited partnership.

A business co-owned by one or more general partners who manage the business and limited partners who invest money into it is called a. . . . not-for-profit partnership. limited partnership. general partnership. limited-liability company. S-partnership

S-corporation

A corporation that is taxed as if it were a partnership (income taxed as personal income of stockholders)

foreign

A corporation that received its corporate charter in California and is doing business in Oregon is called a(n) ____________ corporation in Oregon. alien domestic visiting international foreign

**Small Business Administration**

A governmental agency that assists, counsels, and protects the interests of small business in the U.S.

Stockholders' rights: Proxy

A legal form listing issues to be decided at a stockholders' meeting and enabling stockholders to transfer their voting rights to some other individual or individuals

Franchise

A license to operate an individually owned business as though it were part of a chain of outlets or stores

C. franchise.

A license to operate an individually owned business as if it were part of a chain of outlets or stores is called a A. joint venture. B. syndicate. C. franchise. D. SCORE. E. small-business development center

Franchisee

A person or organization purchasing a franchise

**Contingency plan**

A plan of alternative courses of action if the organization's other plans are disrupted or become ineffective

Operational plan

A plan to implement a tactical plan

Objective

A specific statement detailing what an organization intends to accomplish over a shorter period of time

Mission

A statement of the basic purpose that makes an organization different from others

Joint ventures

Agreements between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time Example: Walmart and India's Bharti Enterprises

Corporations

An artificial person created by law with most of the legal rights of a real person, including the rights to start and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts. -exists only on paper!

Goal

An end result that an organization is expected to achieve over a one- to ten-year period

Franchisor

An individual or organization granting a franchise

Core competencies

Approaches and processes that a company performs well and may give it an advantage over its competitors

Strategic Plan

BROADEST plan, a guide for major policy setting and decision making

Management

COORDINATING an organizations people and resources to achieve the goals of the organization.

entrepreneurial spirit

Characteristic of Entrepreneurs -the desire to create a new business -desire for independence! -motivation!

Not-for-profit corporations

Corporations organized to provide social, educational, religious, or other services, rather than to earn a profit

Franchisor retains a large amount of control over the franchisee's activities Franchisor opening competing franchises within the franchisee's market

Disadvantages of Franchising to the franchisee?

Failure of the franchisee to operate franchise properly Disputes with and lawsuits by franchisees over the terms of the franchise

Disadvantages of Franchising to the franchisor?

What are the 3 Categories of business?

Distribution Service Production

Retail, whole-sale, transportation Concerned with the movement of goods from producers to consumers 33% of all small business

Distribution Industry What kinds of industries can be found here? What is it concerned with? What % of the small business does this industry account for?

Planning

Establishing organizational goals and deciding how to accomplish them

Limited-liability company (LLC)

Form of business ownership that combines the benefits of a corporation and partnership but avoids some of the restrictions and disadvantages

Types of Partners

General Partner Limited Partner

Leading

INFLUENCING PEOPLE to work toward a common goal

corporation.

In the United States, the form of business ownership that generates the largest amount of sales revenues is the. .. . . . . . . . sole proprietorship. partnership. corporation. limited-liability company. S-corporation.

B. the semiconductor industry.

Jim Moniz is contemplating obtaining a franchise. He would like to purchase a franchise in an industry that has had extensive success with franchising in the past. All of the following are possible choices for Jim except A. a fast-food industry. B. the semiconductor industry. C. filling stations. D. car dealerships. E. the soft-drink industry.

Primary reasons for the failure of a business (2)

Mismanagement Lack of Business know-how

Opportunity to start a proven business with limited capital Guaranteed customers Franchisor available for advice and guidance Materials for local promotional campaigns and participation in national campaigns Cost savings when purchasing in cooperation

PROS of Franchising To the franchisee?

• Fast and well controlled distribution of its products • No need to construct and operate its own outlets • More working capital • available for expanded production and advertising • • Franchising agreements maintain product and quality standards • Motivated work force of franchisees

PROS of Franchising to the franchisor?

Construction, mining manufactures 19% of all small business

Production Industry What kinds of industries can be found here? What % of the small business does this industry account for?

Why do some Industries attract Small Business? (2)

Require low initial investment Some special skills/knowledge

E

Roger Jones, a graduate business student, has decided to open his own consulting firm. Since he is an intelligent and hard-working student with previous management experience, Roger feels he is well prepared to succeed since more new businesses fail due to. . . . . . A. a lack of adequate financing. low consumer demand for their products. B. hostile competition. C. a lack of owner commitment. D. mismanagement and lack of business know- how.

Hairdresser, medical/dental care - NON-FINANCIAL CARE 48% of all small business

Service Industry What kinds of industries can be found here? What % of the small business does this industry account for?

Syndicates

Temporary associations of individuals or firms organized to perform a specific task that requires a large amount of capital Most commonly used to underwrite large insurance policies, loans, and investments

Organizing

The GROUPING OF RESOUCES AND ACTIVITIES to accomplish some end result in an efficient and effective manner

Franchising

The actual granting of a franchise

SWOT analysis (for organizational analysis)

The identification and evaluation of a firm's - Strengths - Weaknesses - Opportunities - Threats

Strategic planning

The process of establishing an organization's major goals and objectives and allocating the resources to achieve them

Service Corps of Retired Executives (SCORE) Small Business Institutes (SBI's)

What are the 2 SBA management assistances?

A manufacturer authorizes retailers to sell a certain brand-name item e.g. Honda, Toyota car manufacturers producer licenses distributors to sell a product to retailers e.g. Coca Cola, Pepsi franchisor supplies brand names, techniques, or services instead of a complete product e.g Subway.

What are the 3 types of franchising?

Planning Organizing the enterprise Leading and motivating Controlling Ongoing Activities

What are the 4 basic management functions?

material human financial informational

What are the 4 main resources of an organization??

Franchise Franchising Franchisor Franchisee

What are the 4 terms within Franchising?

Risk of failure Limited potential Limited ability to raise capital

What are the CONS of small business?

Personal relationships with customers and employees Ability to adapt to change Simplified recordkeeping Independence

What are the PROS of small business?

Providing Technical Innovation Providing Employment Providing Competition Filling Needs of Society and other Business

What are the importances of Small Business in our society? (4)

Too rapid expansion, inadequate capital or management skills

What can cause a franchise to fail? (3)

Unlimited liability

Which of the following is not an advantage of a sole proprietorship? Flexibility No special taxes Pride of ownership Retention of all profits Unlimited liability

Capital, Management, and Planning Over expansion

Why do some entrepreneurs and small businesses fail?

Service Corps of Retired Executives (SCORE)

group of BUSINESS PEOPLE who volunteer their services to small business through the SBA

Small Business Institutes (SBI's)

groups of SENIOR/GRADUATE STUDENTS in business administration who provide management counseling to small business

Merger:

the purchase of one corporation by another; essentially the same as an acquisition EX: American Airline & US Airways

Dual-branded franchising

two franchisors offer their products together, is a new trend

The Internet

what is the favored strategy for growth for small businesses?

demographic and economic changes

what kind of changes must small businesses adapt to in the world market place?

ADVANTAGES of Partnerships

• Ease of start-up • Availability of capital and credit • Personal interest • Combined business skills and knowledge • Retention of profits • No special taxes

Advantages of Corporations

• Limited liability • Ease of raising capital • Ease of transfer of ownership • Perpetual life • Specialized management

Conglomerate mergers

• Mergers between firms in completely different industries

Organizational meeting

• The last step in forming a corporation the incorporators and original stockholders meet to adopt corporate by-laws and elect their first board of directors

Incorporation

• The process of forming a corporation - Most experts recommend consulting a lawyer

DISADVANTAGES of Partnerships

• Unlimited liability • Management disagreements • Lack of continuity • Frozen investment • Lack of continuity