Types of Business Ownership

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Questions and Answers

What defines offshoring in business operations?

  • Transferring tasks to a third party to reduce costs.
  • Implementing new technologies to streamline processes.
  • Relocating manufacturing or services to a different country. (correct)
  • Increasing the number of employees in a single location.

Which of the following best describes intrinsic motivation?

  • Motivation that arises from competition with peers.
  • Motivation driven by external rewards.
  • Motivation focused on meeting organizational goals.
  • Motivation based on personal satisfaction and interest. (correct)

What does Herzberg's Two-Factor Theory primarily categorize?

  • Motivators and hygiene factors. (correct)
  • Physical and mental capabilities of employees.
  • Short-term and long-term goals.
  • Intrinsic and extrinsic rewards.

Which management concept is associated with the idea that individuals require different managerial approaches based on their motivation?

<p>McGregor's Theory Y. (C)</p> Signup and view all the answers

What is emphasized in Goal Setting and Management by Objectives?

<p>The importance of attainable and ambitious goals. (B)</p> Signup and view all the answers

What characterizes a general partnership?

<p>All owners share in operations and assume liability (C)</p> Signup and view all the answers

Which of the following is a key feature of an S Corporation?

<p>Pass-through taxation benefits (D)</p> Signup and view all the answers

What is the primary role of management in an organization?

<p>To organize and control people, resources, and tasks (B)</p> Signup and view all the answers

Which of the following describes bureaucracy in an organization?

<p>How the organization operates and runs (C)</p> Signup and view all the answers

What is a distinguishing factor of a limited partner in a partnership?

<p>Has no liability and is not involved in daily operations (C)</p> Signup and view all the answers

Which model is characterized by direct authority and is traditional in nature?

<p>Line model (A)</p> Signup and view all the answers

What is a primary challenge faced in management?

<p>Overcoming employee engagement (C)</p> Signup and view all the answers

In organizational structure, what does the term 'span of control' refer to?

<p>The number of employees directly supervised by a manager (D)</p> Signup and view all the answers

What is the main difference between a general partnership and a limited partnership?

<p>In a general partnership, all owners share in operations and assume liability. In a limited partnership, general partners have unlimited liability and are active in the firm, while limited partners are investors, have no liability, and are not active in the firm.</p> Signup and view all the answers

Which of the following is NOT a pro of a sole proprietorship?

<p>Unlimited liability/risk (A)</p> Signup and view all the answers

What is the purpose of a franchise agreement?

<p>A franchisor sells the rights to a franchisee to use the business name and sell a product or service in a given territory.</p> Signup and view all the answers

Which type of merger occurs when two companies in the same industry join forces?

<p>Horizontal (D)</p> Signup and view all the answers

In a hierarchical organization, what is the primary function of middle management?

<p>Middle management connects the top management and supervisory or first-line management. They are crucial for the effective implementation of company goals.</p> Signup and view all the answers

Explain the difference between outsourcing and offshoring.

<p>Outsourcing involves transferring a business function to an external third party, while offshoring entails relocating a manufacturing process or service to another country.</p> Signup and view all the answers

Which of the following is NOT a component of company culture?

<p>Market conditions (E)</p> Signup and view all the answers

What are the two fundamental theories that form the basis of 'Scientific Management'?

<p>The two basic theories are: Taylor's Scientific Management focused on time, methods, and rules of work while Gantt's charting emphasized the use of visual diagrams to represent work flow.</p> Signup and view all the answers

The Hawthorne Effect suggests that people behave differently when they know they are part of a study.

<p>True (A)</p> Signup and view all the answers

Which of the following management theories emphasizes the firm as a family that fosters cooperation and shared values?

<p>Theory Z (B)</p> Signup and view all the answers

Which of the following is NOT a strategy for employee motivation?

<p>Job satisfaction (D)</p> Signup and view all the answers

What is the core idea behind the 'Expectancy Theory' of motivation?

<p>The core idea is that an employee's motivation to exert effort is influenced by their assessment of: the likelihood of achieving desired outcomes, and the value they place on those rewards.</p> Signup and view all the answers

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Flashcards

Offshoring

Relocating business operations, such as manufacturing or services, to a different country, often for lower labor costs or access to specialized resources.

Company Culture

The specific practices, beliefs, and values that shape the way a company operates and its employees behave.

Maslow's Hierarchy of Needs

A theory of motivation proposing that human behavior is driven by a hierarchy of needs, starting with basic physiological needs and progressing towards self-actualization.

Herzberg's Two-Factor Theory

States that employees are motivated by two factors: motivators (factors that lead to job satisfaction) and hygiene factors (factors that prevent dissatisfaction).

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Vroom's Expectancy Theory

A theory suggesting that people are motivated by their expectations of the outcomes of their actions. This includes the perceived effort required, the likelihood of achieving the goal, and the value of the reward.

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Sole Proprietorship

A business structure where one person owns and operates the entire business, assuming full liability for all debts and obligations.

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Partnership

A legal arrangement where two or more individuals agree to share ownership, profits, and losses of a business.

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Corporation

A legal entity separate from its owners, offering limited liability protection and the ability to raise capital through the sale of stock.

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Merger

A process of combining two or more companies into one, often to create a larger and more competitive entity.

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Acquisition

The process of one company taking over another, often by purchasing a controlling interest in its stock.

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Franchise

A business model where a franchisor grants a franchisee the right to operate a business using the franchisor's established brand, products, and operating methods.

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Cooperative

A group of individuals who join forces to achieve a common economic goal, typically by pooling resources and sharing profits.

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Management

The process of planning, organizing, leading, and controlling resources to achieve organizational goals.

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Pros of Sole Proprietorship

Ease of start/end, be your own boss.

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Cons of Sole Proprietorship

Unlimited liability, limited growth.

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General Partnership

All partners share both the profits and liabilities equally.

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Limited Partnership

Includes a general partner with unlimited liability and limited partners who are investors with no active role in the firm.

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Pros of Partnership

More financial resources, shared management.

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Cons of Partnership

Unlimited liability, disagreements among partners.

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Limited Liability in a Corporation

Shareholders are not personally responsible for the company's debts.

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Pros of Corporation

Limited liability, perpetual life.

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Cons of Corporation

Double taxation, high initial cost.

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LLC

A company offering limited liability to owners, with profits/losses passed through to personal tax returns.

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Horizontal Merger

A merger between two firms in the same industry to diversify or expand.

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Conglomerate Merger

A merger between firms in different industries to diversify operations.

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Role of a Franchisor

Assigns territory, provides training, supplies, and management assistance.

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Role of a Franchisee

Pays upfront costs and follows franchisor procedures.

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Functions of Management

Planning, organizing, leading, and controlling.

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Purpose of Planning in Management

Setting goals and creating strategies to achieve them.

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Organizing Function of Management

The process of arranging resources to achieve the organization's goals.

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Leading function in management

Guiding and motivating employees, and providing feedback.

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Controlling function in management

Monitoring performance and making corrections.

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Study Notes

Types of Business Ownership

  • Basic forms include sole proprietorship, partnership, corporation, franchise, and cooperative.
  • Sole Proprietorship: A business owned by one person; the owner is responsible for all business debts and liabilities. Income and expenses are reported on personal income taxes.
  • Pros: Ease of start-up, being your own boss, pride of ownership, and retaining profits.
  • Cons: Unlimited liability, personal taxes, management demands, time commitment, limited growth, and few fringe benefits.
  • Partnership: An agreement between two or more people to share business operations and profits/liabilities.
  • General Partnership: All owners share in operations and assume full liability.
  • Limited Partnership: Has one or more general partners (active in the firm) with unlimited liability and one or more limited partners (investors) with limited liability (no activity in the firm).
  • Limited Liability Company (LLC): Protects owners from personal liability for company debts or liabilities. Profits and losses are passed through to owners as personal income. Options for taxation as partnership or corporation.
  • Cooperative: A business owned and operated by its members

Partnership Variations

  • General Partnership: All owners share in operations and assume full liability.
  • Limited Partnership: Has one or more general partners (active in the firm) with unlimited liability and one or more limited partners (investors) with limited liability (no activity in the firm).

Corporation

  • A state-chartered legal entity with separate liability from its owners. Shareholders are not personally responsible for company debts.
  • Pros: More money for investment, limited liability, separation of ownership and management, ease of ownership change, perpetual life, and size/scale.
  • Cons: Initial costs, paperwork, dual taxation (corporate and individual), and termination is difficult.

Corporation Variations

  • S Corporation: A corporation with 100 or fewer shareholders. Profits and losses pass through to owners, taxed as personal income.

Corporation Expansion

  • Merger: Two or more firms combine to form a single company.
  • Horizontal Merger: Firms in the same industry, expanding products.
  • Conglomerate Merger: Firms in different industries, expanding operations/investments.
  • Acquisition: One company purchases another.

Franchises

  • A franchisor sells the rights to use a business name/product/service to a franchisee to operate in a specific area. The franchisor provides assistance with operations and standards.

Management

  • The process of organizing, controlling people, resources, and tasks to achieve a specific goal.
  • Challenges: New working arrangements, workforce demands, global competition, ethical issues, downsizing, regulations, and virtual work environments.
  • Functions: Planning (setting goals, strategies), organizing (structure, process), leading (guiding/motivating), and controlling (monitoring/course correction).
  • Decision-making: A key aspect of management, involving identifying problems, establishing criteria, generating alternatives, weighing alternatives, choosing alternatives, and implementing the decision.
  • Organizational Structure: The arrangement of functions and relationships within an organization (e.g., centralized/decentralized authority, span of control, departmentalization [geographic, customer, product]).

Motivation & Employee Expectations

  • Motivation: Drives employees to work toward achieving goals.
  • Employee Expectations: Significant impact on motivation related to task accomplishment and rewards' worthiness.
  • Expectancy Theory: Employee expectations of performance-outcome relationships affect motivation.
  • Equity Theory: Employee perceptions of fairness (comparisons to others) influence motivation.

Strategies for Motivation

  • Job Enrichment: Additional responsibilities to learn new skills, increase decision-making.
  • Job Enlargement: Increased number of tasks (within current responsibilities).
  • Job Rotation: Cross-training in different areas (to keep the job interesting and challenging).
  • Communication: Clear interaction/feedback to improve understanding.
  • Diversity: Different perspectives/value systems from various generations to foster effective teamwork.

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