Entrepreneurship and Small Business Quiz

Key Concepts from Chapter 1: The Changing Face of Business

• Business refers to all profit-seeking activities that provide goods and services
• Includes for-profit businesses and not-for-profit organizations that focus on public service instead of profit
• Factors of production include land (natural resources), labor (human effort), capital (technology, tools), and entrepreneurship (willingness to take risks)
• The private enterprise system, also known as capitalism, is where businesses are privately owned and operate for profit; relies on private property, profits, freedom of choice, and competition
• Historical eras of business in the U.S. include a colonial period, industrial revolution, an age of industrial entrepreneurs, a production era, marketing era, relationship era, and a social era
• Current workforce trends include an aging workforce, diverse workforce, changing nature of work, and flexibility and mobility; innovation through collaboration is also a trend

Skills for Today's Managers

• Vision: Ability to see future needs and lead a company
• Critical Thinking: Analyzing information to solve problems
• Creativity: Developing innovative solutions
• Leadership: Guiding organizations through change and motivating employees

Characteristics of Admired Companies

• Admired companies generally have strong profits, consistent growth, quality products, ethical practices, and social responsibility

Review Questions

• What are the primary objectives of a business?
• Describe the major types of economic systems and their differences.
• How has technology influenced the evolution of business?
• Identify and explain the importance of stakeholders in a business
• Standard of living: The amount of goods/services people can buy with their income
• Quality of Life: General well being like healthcare, environment & safety
• Stakeholders: Individuals or groups affected by business decisions
• Insourcing: Assigning functions internally(production)
• Outsourcing: Contracting functions to external firms

Ethical and Societal Concerns

• Businesses face pressure to act ethically and consider societal impacts
• Social responsibility aims to enhance society's welfare

The Contemporary Ethical Environment

• High-profile corporate scandals have underscored the need for ethical conduct
• Companies like Starbucks & Coca-Cola demonstrate how to integrate ethics into business practices

Corporate Responsibility and Compliance Programs

• The U.S. Sentencing Commission Guidelines outline minimum standards for ethical compliance; includes assigning high-level personnel to oversee ethics, conducting training programs, monitoring compliance, and enforcing ethical codes
• Ethics compliance officers play a key role in implementing programs, detecting & deterring wrongdoing

Individual Ethics and Moral Development

• Personal ethics and moral reasoning evolve through stages, as proposed by Kohlberg
• Preconventional: Self-interest driven
• Conventional: Societal expectations
• Postconventional: Personal principles

On-the-Job Ethical Dilemmas

• Employees often face ethical dilemmas, such as conflicts between personal and organizational interests or pressure to meet performance quotas

Corporate Social Responsibility (CSR) Approaches

• Many companies adopt a three-pronged approach to CSR: philanthropy, risk management, and creating value

Fundraisers and Ethical Careers

• Fundraisers need strong communication, organization, & leadership to manage relationships with donors
• They need to uphold high ethical standards

Economic Challenges Facing Business Today

• Microeconomics focuses on individual and business behavior in specific markets (e.g., supply, demand, pricing)
• Macroeconomics examines the broader economy (e.g., GDP, inflation, unemployment rates)
• Economic indicators help gauge the economy's health; include GDP, inflation, and unemployment rates
• Business cycles include expansion, peak, recession, and recovery, and these cycles impact consumer behavior, business strategies and employment levels

Competing in World Markets

• Nations trade to capitalize on each other's strengths
• Trade is measured by a nation's balance of trade (exports minus imports) and balance of payments (total money flow in and out of a country)
• Trade barriers include economic restrictions, legal and political barriers
• Efforts to reduce trade barriers include international agreements & organizations like the WTO

Forms of Business Ownership and Organization

• Small businesses are instrumental in job creation, innovation and economic growth (99.7% of U.S companies)
• They drive economic growth by offering unique products & services and adapting to consumer needs
• Common reasons for small business failure include management challenges, inadequate financing and regulatory challenges

Franchising

• Franchising allows for business expansion using others' investment and access to new geographic areas
• Franchisees benefit from an established brand, model & ongoing support. This can be viewed as a lower risk way to start a business.
• Challenges exist for franchisees in maintaining compliance with existing brand standards. Franchisors also have risks from the performance of franchisees

Forms of Private Business Ownership

• Sole Proprietorship: Business owned by one individual with full control and liability for all debts.
• Partnership: Ownership by two or more, offering shared resources and expertise but with unlimited personal liability.
• Corporation: A separate legal entity with limited liability. Raising funds by selling stock (double taxation)
• Special types of Corporations (e.g., S-corp & LLC) often have specific tax implications.
• Public Ownership: Government-run businesses provide essential services
• Collective Ownership (Cooperatives): Owned by groups of people or businesses to share resources.

Corporate Structure and Management

• Different types of corporations: Domestic, foreign & alien
• Corporations operate under a charter (legal document outlining name, purpose and structure)
• Stakeholders, Boards of Directors, and Corporate Officers set corporate policies, manage operations.

Mergers and Acquisitions (M&A)

• Mergers and Acquisitions (M&A) refers to different business combination structures that can result in completely new companies or entities.
• Vertical Mergers: Combine companies at different production stages
• Horizontal Mergers: Combine companies in the same industry for wider market reach
• Conglomerate Mergers: combine unrelated companies for diversification

Joint Ventures

• Shared ownership/funding to pursue a specific project.
• Can reduce risks involved in doing business in new countries.

Starting Your Own Business – The Entrepreneurship Alternative

• Entrepreneurs seek opportunities and start businesses to fulfill needs.
• Entrepreneurship is different from small business ownership as it focuses on growth/expansion
• Types of Entrepreneurs include classic entrepreneurs, serial entrepreneurs and social entrepreneurs
• Reasons for choosing entrepreneurship include independence, financial success, job security, and improved quality of life
• Environmental factors that support entrepreneurship include globalization, education, and information technology

Production and Operations Management

• Operations management transforms resources into goods and services efficiently, focusing on maximizing productivity and optimizing resources.
• Production Systems include Mass production (creating identical items), Flexible production (creating various items on same line) & Customer driven production (creating only with customer orders)
• Production Processes include analytic production (breaking things into parts) & synthetic production (combining parts into products)
• Planning involves processes (e.g., layouts; make, buy, lease), selecting suppliers, and inventory control (JIT, MRP)
• Quality Control Methods (e.g., 6 Sigma and ISO standards)

Customer-Driven Marketing

• Marketing involves creating, communicating, delivering, and exchanging offerings for providing value to customers and society
• The marketing concept is a customer-centric approach focused on fulfilling customer needs
• Not-for-profit & nontraditional marketing are used to meet non-profit needs and different interests
• Market Segmentation divides a large market into smaller, more manageable segments
• Consumer behavior influences marketing strategies
• Relationship marketing focuses on building long-term relationships for customer loyalty and cost savings

Product and Distribution Strategies

• Product strategy combines features and services to meet customer needs, and includes concepts like Convenience, Shopping, Specialty, & Unsought products
• Products progress through a life cycle (Introduction, Growth, Maturity, Decline) and organizations must adapt their strategies to maintain success in each phase
• Distribution refers to moving products from producers to customers, and is often facilitated by channels such as direct or indirect sales

Wholesaling and Retailing

• Wholesalers sell products to retailers and not to end consumers
• Retailers engage directly with consumers

Using Tech to Manage Information

• Disruptive innovation and Industry 4.0 are reshaping business practices

The Financial System

• The financial system moves money from savers to users, using direct and indirect methods.
• Securities (e.g., stocks, bonds, and money market instruments) represent claims on future income
• Financial Institutions (e.g., banks, insurance companies, and mutual funds) play a critical role within the system