MIE 201 Lecture Notes Ch 1-4 Spring 2022 PDF

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MIE 201 Lecture Notes Ch 1-4 Spring 2022...

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Part 1: Ch 1: Business → Products → Value - Marketing - HR - IT Goal: Profit - Nonprofits still need revenue Stakeholders: interested in success of business Activities of Business: - Management → employees -

Marketing → customers

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Finance → owners

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Finance Production/operations Wholesale/retail

Economics: how resources (factors of production) distributed for production of goods/services - Natural - Human (labor) - Financial (capital) - Intangible (reputation) Systems: - Communism: Most businesses government owned and operated - Socialism: Some basic industries government owned - Capitalism: Free market economy; no gov’t intervention (everyone has a mixed economy bc no such thing as pure forms) Free Enterprise: 1. Right to own property and pass on to heirs 2. Right to earn profits and use them lawfully 3. Right to make decisions for running businesses 4. Right to choose career, location, goods to buy, etc. Demand: How many products customers are willing to at different prices at a given time Supply: how many products businesses are willing to sell art different prices at a given time Equilibrium price: where supply and demand meet Competition: - Pure competition: Prices solely based on supply and demand (corn, potatoes) - Monopolistic competition: Allows producers to control price more; more unique products (cereal, chips) - Oligopoly: Few businesses selling a product (cars, airplanes) - Monopoly: One business supplying a product (drugs) Expansion: growth and spending → inflation Contraction: economy slows → recession (unemployment, may lead to depression) GDP: domestic profits - Replaced GNP

Economy Development: Early: Agriculture Industrial Rev: new tech Manufacturing/marketing: customer needs Service/digital: efficiency Technology: - AI could disrupt workforce - Productivity and quality service - Biased Ch 2: Business Ethics and Social Responsibility Business Ethics: rules that are acceptable conduct in business; trust (Ethical =/= Legal) - Decisions of individuals/teams Social Responsibility: minimize negative impact, maximize positive impact - Impact of entire organization Corporate Citizenship: extent to which businesses meet responsibilities from stakeholders - Commitment indicates strategic focus - Action and measurement of extent; implementing initiatives Tone from the Top: Leaders need to show commitment to ethics; lead by example - Clearly communicate expectations - Educate - Train employees on how to deal with ethics crisis Risk and Reward- Moral Hazard: Healthy Connection: if outcome is positive, company benefits; if negative, company suffers Moral Hazard: if outcome is positive, company benefits; if negative, external party suffers Sarbanes-Oxley Act: criminalized securities fraud and more penalties for corporate fraud - After a scandal in 2000s (2002) Dodd-Frank Act: offer protection against deceptive financial products - After recession in 2008 (2010) Misconduct: ethical → legal dispute → gray area/no precedents Conduct: builds trust in business relationships → difficult if bad reputation Ethical Issue:

Identifiable problem that needs a decision that could be right/wrong

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Complex (gray) Knowledge/experience of culture Knowledge competence in area of concern - Bribes - Misuse of company time - Abusive/intimidating behavior - Misuse of company resources - Conflict of interest Honesty: Employees/Companies: - Abide by-laws - Transparency - Use of company resources - Fair competition prices Communications: - Honest advertising - Safety and quality - Labeling Relationships: - Company secrets - Obligations and responsibilities - Undue pressure - Plagiarism Improving Ethical Behavior: - Individual standards - Influence of managers and coworkers - Control through authority and example - Consistent compliance - Opportunity to engage in misconduct - Codes of Ethics - Whistleblowing - Cultural/Integrity-based Ethics Programs

Pros

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Cons Stockholders and

Issues: -

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benefits society Financial and tech resources Members of society Prevent govt regulation Ensure economic survival

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Sidetracks from profit Gives businesses more power Expertise? Govt issue- let voters deal with it Nonprofits

Owner/Stockholder - Proper accounting procedures - Provide info - Protecting owners’ rights/investments Employees - Safe workplace - Equal opportunities, fairness, listening Consumers (Consumerism) - Letters, lobbying, PSA’s, boycotting - JFK 1962 consumer bill of rights (safety, be informed, choose, be heard) Unemployment: - Ethical implications - Wealth gap - Unemployed less skilled, don’t want to train them - Factory closures unethical Sustainability: pollution, alternatives, environ issues, community relations

Ch 3: Business in a Borderless World Exporting: to foreign markets Importing: from foreign markets Balance of trade: exports vs imports Trade deficit: negative balance of trade (import > export) Balance of payments: flow of money in/out Free Trade Doesn’t Exist: Economic barriers: - Industrialized nations ^ - Developing countries low per-capita income - Infrastructure - Exchange rates: Ethical/legal/political: - Laws - Political climates - Tariffs - Fixed: static - Ad Valorem: based on value - Trade restrictions - Exchange controls - Quota

- Embargo - Dumping Sociocultural: - Language (written, spoken, body) - Family roles - Time perception (meal times, siesta, breaks/vacations) - Customs and holidays - Metric vs empirical Technological: - Infrastructure - Tech, edu, healthcare, gvn’t, etc. - Advances - Global marketing - New competition - Better products outside US Organizations: GATT (1947): - Forum for tariff negotiations - >100 nations abided by rules - WTO evolved from GATT World Bank: - Loan money to underdeveloped countries - Reduce/eliminate poverty IMF: -

Promotes trade by eliminating trade barriers Foster international financial cooperation Stabilize international economy

USMCA: US, Mexico, Canada (formerly NAFTA) EU: European Union APEC: Asia-Pacific Economic Cooperation ASEAN: Association of Southeast Asian Nations GDPR: General Data Protection Regulation - Request data collected about you - Restricts use of data collected - Notify users of how their data is used

Terms: Import/Export: Trading Companies: Licensing:

Fully international Middlemen; handle all trade activities, like export agents but broader Exchange for fe; alternate to direct investment in political instability

Franchising: Financial commitment and agreement to conduct to franchisers standards Contract Manufacturing: Final product carries domestic company name (Foxconn) Outsourcing: Separate company hired- lose control Offshoring: Build new factory in other country- control Joint Venture: Can’t do direct investment? → joint venture Strategic Alliance: High competition and high costs (auto and computer industries) Direct Investment: Want control and willing/able to invest considerable amount Multinational Company Strategies: Multinational Strat: customize to cultural diffs Global Strat: standardized across globe Ch 4: Options for Organizing Business Sole proprietorship: - Owned by one - Services > products - Almost ¾ of US companies - Women typically less access to credit Cons Pros - Unlimited liability - Easy to form - Scarce funding - Privacy - Need diverse skills - Owner keeps all profits - Success tied to the owner - Flexibility - Lack of qualified employees - Minimal govt regulation - Higher taxation rate - Taxed at individual tax rates - Easy dissolution Partnerships: - Two+ owners - Minimizes disadvantages, maximizes advantages - Larger than sole, smaller than corporations - General partnerships: unlimited liability - Limited partnerships: don’t share management, share profits; risky investment projects - Articles of partnership - Lists assets of each partner contributed (partnership capital) - States management duties - Specifies division of profits/losses - Specifies restrictions - Taxation of partnerships: quasi-taxable organizations - Don’t pay taxes, but file tax return on profitability and division of profits - Report share of profits and pay taxes at income tax rate Pros - Govt regulations are few - Easy to organize - Availability of capital and credit Cons - Combined skills - Unlimited liability - Swift decision making - Responsible for each other

- New agreement - Distribution maybe uneven - Difficult to sell interest - Not as much external funding Corporations: - Assets/liabilities separate from owners - Many rights/duties of a person - Majority of US sales and income - Owned by many individuals and organizations who own shares - Stock: Bought, sold, gifted, inherited - Dividends: Profits distributed to stockholders → NOT all after-tax profits paid -

Creation: - Choose location; follow state procedure - File legal articles of incorporation with the state - State issues legal corporate charter - Establish bylaws and elect board of directors Types of Corporations: Domestic corporations: Conducts business in the state of incorporation Foreign corporations: Conducts business outside the state of incorporation Alien corporation: Conducts business outside nation of incorporation Private: - Owned by few - No stock sold - Not required to disclose financial info publicly Public: Anyone can buy, sell, or trade stock - IPO: initial public offering - Quasi-public: owned and operated by the govt - Nonprofit: focus on service > profit; not owned by govt Elements of Corporations: - Board of Directors: - Responsible for meeting objectives on schedule - Legally liable for mismanagement or misuse - Important duty is hiring corporate directors - Inside and outside directors - Preferred: - First claim to profits - Dividend payments on preferred stocks are usually fixed % kf initial issuing price - Common: - Voting rights, but no preferential treatment - May vote by proxy - Preemptive rights- can buy new shares of stock Pros - Limited liability Cons - Easy transfer of ownership - Double taxation - Perpetual life - Expensive to form - Easy funding - Disclosure of info publicly - Expansion potential - Owners/managers not the same

Joint venture: partnership established for a specific project or for a limited time. S Corporations: taxed as though it were a partnership with restrictions on shareholders LLC: provides limited liability and taxation like a partnership but places fewer restrictions on members Cooperatives: composed of individuals banded together to reap the benefits of larger organization Merger: Two companies combine (Disney-Pixar, Exxon-Mobil) - Horizontal: Firms make and sell similar products - Vertical: Different but related levels of industry - Conglomerate: Unrelated industries Acquisition: One company buy controlling interest in voting stock of another company (Amazon>Whole Foods) - Hostile takeover - Tender offer: raider offers higher than market value - Proxy fight: persuade other shareholders that current board of directors is bad - Poison pill: current leadership sells shares at lower price - Shark repellant: increase amount of shareholders needed - White knight: find another company to takeover - Leveraged buyout...