MGMT 1301 EXAM 2 Study Guide PDF

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Study Guide MGMT 1301 EXAM 2 CH. 5 4 forms of business ownership: 1. Sole proprietorships (oldest and simplest form) 2. Partnerships 3. Corporations 4. Cooperatives Sole Proprietorships- a business owned and typically managed by one person. 5 Benefits = 1. Start up the business with ease. 2. Make all your own decisions. 3. Keep all the profits. 4. Keep your taxes relatively simple. 5. End the business with ease. 5 drawbacks = 1. Have unlimited financial liability (your personal possessions are at risk) 2. Have limited financial resources and few fringe benefits. 3. Have management problems. 4. Be overstressed about time. 5. Not be able to sell or pass along the business. Partnerships: Two or more Owners Partnership-is a business owned and operated by two or more persons as a voluntary legal association. Types of partnerships-1. General partnership: partners share business profits and liabilities. 2. Limited partnership: some partners have less liability and responsibility. 3. Master limited partnership: the partnership acts like a corporation, selling stock. 4. Limited liability partnership: the partnership limits the risk of loss of personal assets. 4 benefits = 1. Start up the business with relative ease. 2. Have more financial resources. 3. Have more managerial and other expertise. 4. Keep your taxes relatively simple. 3 drawbacks = 1. Experience personality conflicts or other disagreements among partners. 2. Have unlimited liability. 3. Have difficulty ending or changing the partnership and can’t pass the business along. Corporations: 4 Types The C Corporation: any number of owners, two levels of taxation. The S Corporation: up to 100 owners, only one level of federal taxation. Limited liability company (LLC): one level of federal taxation, little or no liability. The B Corporation: a “benefit corporation” legally required to adhere to socially beneficial practices. 5 benefits: 1. Have little or no liability. 2. Get possible tax breaks. 3. Have far more financial resources. 4. Have far more managerial and other expertise. 5. More easily sell ownership shares and continue the life of the business. 4 drawbacks: 1. Have to deal with startup and ongoing costs and paperwork. 2. Be taxed twice. 3. Have to publicly disclose financial information. 4. Have difficulty ending the corporation. Cooperatives: a corporation owned by its user members, who have pooled their resources for their mutual benefit. 5.2 FRANCHISES Franchise: an arrangement in which a business owner allows others the right to use its name and sell its goods or services within a specific geographical area. 3 types of franchises: 1. Business format – chain store or franchise outlet. 2. Product-distribution – distribute product. 3. Manufacturing – make and distribute product. 5 benefits: 1. Own oyour own business and be your own boss to some extent. 2. Start your new enterprise with some name recognition. 3. Follow someone elses proven formula for doing business. 4. Receive marketing support. 5. Receive management and financial support. 5 drawbacks: 1. Need to come up with a large initial franchise fee and other startup costs. 2. Need to share your sales with the franchisor. 3. Have to endure close management by the franchisor. 4. Possibly have to deal with shady practices by franchisor. 5. Possibly be disappointed in the payoff of your franchise. Trends in franchising: home based businesses, minorities and franchising, going international. 5.3 MERGERS AND ACQUISITIONS: PATHS TO BUSINESS EXPANSION Two ways to grow your company: 1. Internal expansion- increasing sales and capital investment. 2. External expansion- a company merges with or buys another company or companies. Two types of external expansion: 1. Merger- joining two companies together. 2. Acquisition- buying another company.

Study Guide MGMT 1301 EXAM 2 4 reasons mergers and acquisitions occur: 1. As a shortcut to growth. 2. To acquire particular management talent. 3. To save money by reducing costs. 4. To reduce taxes. 3 types of mergers: 1. Horizontal mergers- two companies merge that are in the same industry and perform the same activity. 2. Vertical mergers- two companies merge that are in the same industry but each performs a different activity. 3. Conglomerate mergers- two companies merge that are in different industries and each performs different activities. Ways to launch hostile takeover: 1. Tender offer- offer shareholders above market price for their stock. 2. Proxy fight- urge shareholders to vote for the raiders directors. Ways to resist a hostile takeover: 1. White knights- locating a more acceptable buyer. 2. Launch a poison pilltaking more debt to make the company less attractive. Two borrow and buy strategies: 1. Leveraged buyout- one firm borrows money to buy another firm. 2. Employee buyout- a firms employees borrow money against their own assets such as their houses or their pension funds to purchase the firm from its present owners, the employees then become the new owners of the firm. CHAPTER 6 6.1 Being a small business owner vs being an entrepreneur. Micropreneurs- those who take the risk of starting and managing a business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle. Small business – a business that is a) independently owned and operated b) is not dominant in its field of operation, and meets certain criteria set by the SBA for c) number of employees and d) annual sales revenue. Entrepreneurs- business owners who, in the classic meaning of the term, see a new opportunity for a product or service and start firms that may lead to a high-growth business. 3 types of entrepreneurs – classic entrepreneur- an individual who sees a new opportunity for a product or service and starts a firm that can lead to a high-growth business, 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, and entrepreneurial team- a group of people with different kinds of expertise who form a team to create a new product. Opportunity entrepreneur- those who are ambitious and start their own businesses in a voluntary pursuit of opportunity. Necessity entrepreneurs- people who suddenly must earn a living and are simply trying to replace lost income. 4 characteristics of an entrepreneur- 1. High self confidence and belief in personal control. 2. High need for achievement and action orientation. 3. High tolerance for ambiguity and risk. 4. High energy level. 6.2 SMALL BUSINESS CONTRIBUTIONS- represent most employers and employ half of US workers. Provide more new jobs. Provide more first jobs. Are often innovators in their fields. Types of small businesses: home-based (freelance work, direct sales, customer service, transcription service, tutoring) networking- the process of establishing and maintaining connections with professionals and managers in your field to help you advance in your career. 2. Web-based business- simple and reliable servers, speedy wireless networks, a sophisticated economic infrastructure, facebook tools for reaching local customers. Two reasons to buy your business than start-to reduce uncertainty, and to generate profits more quickly. 6.3 STARTING UP step 1: read about business and your prospective business. Step 2- talk to knowledgeable people mentors and trade associations. Step 3- get experience. Business plan- a document that outlines a proposed firms goals, the methods for achieving them, and the standards for measuring success. 3 important reasons for writing a business plan- 1. Creating a business plan helps you get financing. 2. Creating a business plan helps you think through important details. Having a business plan suggests your company will succeed. Business model- the need the firm will fill, the operations of the business, its components and functions, as well as its expected revenues and expenses. Reasons not to create a formal business plan- you may need to act fast to get the business going. You

Study Guide MGMT 1301 EXAM 2 may be able to get financing without a full formal plan. Many firms have done well without a business plan. 6.4 FINANCING- 8 sources of funds- 1. Personal savings, credit cards, and 2nd mortgages. 2. Family and friends. 3. Supplier and barter arrangments. 4. Financial institutions. 5. Small business administration-backed loans. 6. Angel investors and venture capitalists. 7. Public stock offerings. 8. Other funding sources. Incubators- a facility that offers small businesses low cost offices with basic services. Enterprise zone- a specific geographic area in which government tries to attract business investment by offering lower taxes and other government support. 6.5 ACHIEVING SUCCESS why small businesses fail1. Inadequate mgmt. skills. 2. Lack of financial support. Difficulty hiring and keeping good employees. 4. Aggressive competition. 5. Government paperwork. How to keep a small business healthy- 1. Keep good records and know when to ask for help. 2. Stay in tune with your customers. 3. Learn how to manage employees....