Introduction to Business

FOR FINAL

#1: Intro to Business & Economics 2

#4: Forms of Business Ownership 3

#5: Entrepreneurship 6

#6: MGT & Leadership 8

#9: Marketing 11
#1: Intro to Business & Economics

● Business: A combination of commerce, occupation and organization that produces

& distributes the goods and services that create value for the people in society.
● Factors:
Internal External

1. Marketing 1. Market structure

2. Objective & strategy 2. Macro economy
3. Human resources 3. Law
4. Production & operations mgt 4. Social responsibility
5. Accounting & finance 5. Ethics
● Demand Law: If price of a commodity increases the quantity demanded will
decrease & if price of a commodity decreases the quantity demanded will increase,
ceteris paribus.
● Supply Law: If price of a commodity increases the quantity supplied will increase & if
price of a commodity decreases the quantity supplied will decrease, ceteris paribus.

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#4: Forms of Business Ownership

Sole Proprietorship: A form of business organization that is established, owned, operated

and often financed by one person.

Advantages Disadvantages

I. Easy & inexpensive to form I. Unlimited liability

II. Profits all go to the owner II. Difficult to raise capital
III. Direct control over business III. Limited managerial expertise
IV. Freedom from govt regulation IV. Trouble finding qualified employees
V. No special tax V. Personal time commitment
VI. Easy to dissolve VI. Losses are owners responsibility
VII. Unstable business

Partnership: An association of two or more individuals or parties who agree (orally or in

written) to operate a business by sharing profit, loss & responsibility.

General Limited

- All partners share profit & mgt - General Partner: Unlimited liability
- Co own assets - Limited Partner: Liability limited to
- Act on behalf of the firm their investment, No management
- Unlimited liability involvement, Helps to finance

Advantages Disadvantages

I. Easy to form I. Unlimited liability

II. Availability of capital II. Potential conflict between partners
III. Diversity of skill III. Complexity of profit sharing
IV. Flexibility IV. Difficulty exiting or dissolving
V. No special tax partnership
VI. Relative freedom from govt

Corporation: A legal entity subject to the laws of a state in which it is formed where the right
to operate as a business is issued by state. A corporation can own property, enter into
contracts, sue & can be sued and engage in business operations.
● Formation Process:
○ Selecting name
○ Writing articles of incorporations
○ Paying required fees & taxes
○ Holding organizational meeting
○ Adopting bylaws, electing directors
● Corporate Structure:

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○ Stock/Shareholders: owners, receive profit from dividends, sell shares, elect
board of directors.
○ Board of directors: handle overall management, set goals & policies, hire top
management, oversee operation & finance.
○ Top management
● Types:
○ C type: basic form; small business can have liability protection through C
type(LLC)
○ S type: hybrid form; allows smaller corporations to avoid tax

Advantages Disadvantages

I. Limited liability I. Double taxation of profit

II. Easy to transfer ownership II. Costly & complex to form
III. Unlimited life III. More govt restrictions
IV. Tax deduction
V. Ability to attract financing

Franchising: A form of business or organization, that involves a franchisor, the company

supplying the product or service concept and a franchisee, the individual or company selling
goods/services in a certain geographic area. A franchise agreement allows the franchisee to
use franchisor’s brand name, logo, trademark.

Advantages Disadvantages

I. Increased ability for franchisor to I. Loss of control

expand II. Cost of franchising
II. Recognized name, product, & III. Restricted operating freedom
operating concept
III. Management training & assistance
IV. Financial assistance

Cooperatives: A legal entity with several corporate features, such as limited liability,
unlimited lifespan, an elected executive board and admins, staff. Member-owners pay
annual fees and share profits according to their contribution. Co-ops are autonomous
businesses, owned and controlled by the members (buyers & service takers) not by the
owners.
● Types:
○ Buyers: Combine members purchasing power. At the end of the year,
members get shares of the profit based on their consumption.
○ Seller: Individual producers join to compete more effectively with large
producers.
● Principles:
○ Open membership
○ Democratic member control
○ Members economic participation
○ Autonomy
○ Education & training

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Joint Venture: In a joint venture two or more companies form an alliance to pursue a
specific project, usually for a specific time period.
● Benefit
○ Handling too large project
○ Access to new markets, products, technology

Mergers: It occurs when two or more firms combine to form a new company. In a well
established industry, mergers can produce winning results in terms of efficiency & cost
minimization.
● Types:
○ Horizontal: companies at the same stage & same industry
○ Vertical: a company buys a firm in the same industry
○ Conglomerate: companies from unrelated industry
○ Leveraged Buyout (LBO): corporate takeovers financed by large amounts of
borrowed money

Acquisition: A corporation or investor group finds a target company & negotiates with its
board of directors to purchase it.

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#5: Entrepreneurship
Entrepreneurship is the process of developing, organizing, and running a new business to generate profit while
taking on financial risk.

Entrepreneur
Entrepreneur is the person who develops, organizes, and runs a new business to generate
profit while taking on financial risk.
➢ Types
1. Classic: Classic entrepreneurs are risk-takers who start their own companies
based on innovative ideas. Some classic entrepreneurs are micropreneurs
who start small and plan to stay small. They often start businesses just for
personal satisfaction and the lifestyle.
2. Multipreneurs: Entrepreneurs who start a series of companies. They thrive
on the challenge of building a business and watching it grow.
3. Intrapreneurs: Entrepreneurs who don’t own their own companies but apply
their creativity, vision, and risk-taking within a large corporation. Called
intrapreneurs, these employees enjoy the freedom to nurture their ideas and
develop new products, while their employers provide regular salaries and
financial backing. Intrapreneurs have a high degree of autonomy to run their
own mini companies within the larger enterprise. They share many of the
same personality traits as classic entrepreneurs, but they take less personal
risk.
➢ Characteristics
1. Personality:
● Ambitious ● Risk Taker ● Energetic

● Independent ● Visionary ● Passionate

● Self Confident ● Creative ● Committed

2. Managerial Ability
3. Technical Knowledge

Small Business
A business which functions on a small scale level involves less capital investment, less
number of labor and fewer machines to operate is known as a small business.
➢ Process
1. Getting Started
a. Finding the Idea
b. Choosing form of organization
c. Business Plan
i. Executive Summary
ii. Vision and mission statement
iii. Company overview

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iv. Product and/or service plan
v. Marketing plan
vi. Management plan
vii. Operating plan
viii. Financial plan
ix. Appendix of supporting documents
2. Financing the Business
a. Debt: borrowed funds that must be repaid with interest over a stated
time period
b. Equity: funds raised through the sale of stock (i.e., ownership) in the
business.
i. Angel investors: individual investors or groups of experienced
investors who provide financing for start-up businesses by
investing their own money, often referred to as “seed capital.”
ii. Venture capital: financing obtained from venture capitalists,
investment firms that specialize in financing small, high-growth
companies.
3. Buying A Small Business
➢ Managing a Small Business
1. Using Outside Consultants
2. Hiring and Retaining Employees
3. Going Global with Exporting
➢ Impact
1. Independence and a better lifestyle
2. Personal satisfaction from work
3. Best route to success
4. Rapidly changing technology
5. Major corporate restructuring and downsizing
6. Outsourcing
7. Small businesses are resilient
➢ Small Business Administration (SBA)
A government agency that speaks on behalf of small business; specifically it helps people
start and manage small businesses, advises them in the areas of finance and management,
and helps them win federal contracts.
1. Financial Assistance Programs
2. SCORE-ing with Management Assistance Programs
3. Assistance for Women and Minorities

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#6: MGT & Leadership
Management is the process of guiding the development, maintenance, and allocation of resources to attain
organizational goals. Managers are the people in the organization responsible for developing and carrying out
this management process.

➢ Functions:

Planning Leading Organizing Controlling

-Set objectives and -Lead and Motivate -Design jobs & -Measure
state mission employees specify task performance
-Examine -Communicate with -Create org structure -Compare
alternatives employees -Staff position performance to
-Determine needed -Resolve conflicts -Coordinate with standards
resources Manage changes activities -Take steps to
-Create strategies to -Set policy & improve
achieve goals procedures
-Allocate resources

● Planning
Planning begins by anticipating potential problems or opportunities the organization may
encounter. Managers then design strategies to solve current problems, prevent future
problems, or take advantage of opportunities.

➔ Types

Type Time Level of Goal Breadth Extent of Accuracy &

Span Management of Coverage Predictability
Content

Strategic 1y-5y Top Establish Broad External High degree

mission and environment of
and general and entire uncertainty
long-term organization
goals

Tactical 1y> Mid Establish More Strategic Moderate

mid-range specific business degree of
goals for units certainty
implement
ation

Operational Current Supervisory Implement Specific Geographic Reasonable

and and and Degree of
activate concrete functional certainty
specific divisions
objectives

Contingency Event or Top & Mid Unforesee Both External Reasonable

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a n broad environment degree of
situation challenge and and entire certainty
demand s and detailed organization once event
opportuniti or situation
es occurs

● Organizing
organizing, which is the process of coordinating and allocating a firm’s resources in order to
carry out its plans. Organizing includes developing a structure for the people, positions,
departments, and activities within the firm.
Includes:
1. Dividing up tasks (division of labor)
2. Grouping jobs and employees (departmentalization)
3. Assigning authority and responsibilities (delegation)
Management:
1. Top Level
2. Mid Level
3. Supervisory Level

● Leading
Leadership is the process of guiding and motivating others toward the achievement of
organizational goals. A leader can be anyone in an organization, regardless of position, able
to influence others to act or follow, often by their own choice.
This ability to influence others to behave in a particular way is called power.
• Legitimate power- position in an organization
• Reward power- control over rewards
• Coercive power- ability to threaten negative outcomes
• Expert power- extensive knowledge in one or more areas
• Referent power- personal charisma and the respect/admiration the individual inspires
➔ Leading Style
Autocratic Participative Free Rein

-Manager makes most -Manager shares decision- -Manager turns over virtually
decisions and acts in an making with group members all authority and control of
authoritative manner. and encourages teamwork. the group.
-Manager is usually -Manager encourages -Members of group are
unconcerned about discussion of issues and presented with a task and
subordinates’ attitudes alternatives. given freedom to accomplish
toward decisions. -Manager is concerned it.
-Emphasis on getting tasks about subordinates’ ideas -Approach works well with
accomplished. and attitudes. highly motivated,
-Approach is found in military -Manager coach experienced, educated
officers and some production subordinates and helps personnel.
line supervisors. coordinate efforts. -Approach is found in
-Approach is found in high-tech firms, labs,
many successful and colleges.
organizations.

● Controlling

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Controlling is the process of assessing the organization’s progress toward accomplishing its
goals. It includes monitoring the implementation of a plan and correcting deviations from that
plan.
Set Standards> Measure Performance> Compare with std> Corrective action> Use info in
future

➢ Roles:
Monitor Seeks out and gathers information relevant to the
organization
Informational
Roles Disseminator Provides information where it is needed in the organization

Spokesperson Transmits information to people outside the organization

Figurehead Represents the company in a symbolic way

Inter
personal Leader Guides and motivates employees to achieve organizational
Roles goals

Liaison Acts as a go-between among individuals inside and

outside the organization

Entrepreneur Searches out new opportunities & initiate changes

Disturbance handler Handles unexpected events & crisis

Decisional
Roles Resource allocator Designates the use of financial, human, and other
organizational resources

Negotiator Represents the company at negotiating processes

❖ Decision Making Process:

1. Recognize or define the problem or opportunity.
2. Gather information so as to identify alternative solutions or actions.
3. Select one or more alternatives after evaluating the strengths and weaknesses of them.
4. Put the chosen alternative into action.
5. Gather information to obtain feedback on the effectiveness of the chosen plan.
➢ Skills:
1. Conceptual (include the ability to view the organization as a whole,
understand how the various parts are interdependent, and assess how the
organization relates to its external environment. Needed most in Top Level)
2. Human Relations (interpersonal skills managers use to accomplish goals
through the use of human resources. Needed in all Level)
3. Technical (Specialized areas of knowledge and expertise and the ability to
apply that knowledge make up a manager’s technical skills. Needed most in
Supervisory Level)

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#9: Marketing
Marketing is a set of processes for creating, communicating, and delivering value to customers and for improving
customer relationships. It includes everything that organizations do to satisfy customers’ needs.

● Marketing Concept
○ Finding customer’s need
○ Developing products according to customer’s need
○ Satisfying customers
○ Achieving organizational goals

● Marketing strategy is a plan for doing two things: selecting a target market and then
implementing strategies for creating, pricing, promoting, and distributing products that
satisfy customers’ needs.

● Target market is a specific group of consumers who are particularly interested in a

product, would have access to it, and are able to buy it.

● Marketing Mix is a combination of tools

1. Product (developing product for market)
2. Price (setting price)
3. Place (distributing & getting product in a place)
4. Promotion (informing potential buyers)

● Marketing strategy

Selecting Market Developing Marketing Mix

Identifying Segmenting

Consumer Demographic (age, gender, income) 1. Developing Product

Market (for
personal use) Geographic (region, climate, pop. density) 2. Setting price for product

Industrial Behavioral (receptiveness to technology, usage) 3. Placing product

Market (for
production) Psychographic (interest, values, attitudes) 4. Promoting product

Marketing Mix

1. Developing product

a. Marketing research: Process of collecting and analyzing data that’s relevant

to a specific marketing situation.
i. Primary data: info that collected directly through-
a. Survey
b. Interview
c. Focus group: Group of individuals brought together for the purpose of
asking them questions about a product or marketing strategy.
ii. Secondary data: using previously collected info

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b. Branding
i. Brand: Word, letter, sound, or symbol that differentiates a product from
similar products on the market.
ii. Trademark: Word, symbol, or other mark used to identify and legally
protect a product from being copied.
iii. Branding Strategy:
1. Private: Product made by a manufacturer and sold to a retailer
who in turn resells it under its own name.
2. Generic: Product with no branding information attached to it
except a description of its contents.
3. Manufacturer: Branding strategy in which a manufacturer sells
one or more products under its own brand names.
iv. Packaging: The container holding the product, can influence consumers’
decisions to buy products or not buy them. It offers them a glimpse of
the product and should be designed to attract their attention.
v. Labeling: The information on the packaging, identifies the product. It
provides information on the contents, the manufacturer, the place where
it was made, and any risks associated with its use.

2. Pricing

a. Strategy:
i. Skimming: Pricing strategy in which a seller generates early profits by
starting off charging the highest price that customers will pay.
ii. Penetration: Pricing strategy in which the seller charges a low price on
a new product to discourage competition and gain market share.
iii. Cost based: Pricing strategy that bases the selling price of a product on
its cost plus a reasonable profit.
iv. Demand based: Pricing strategy that bases the price of a product on
how much people are willing to pay for it.
v. Target costing: Pricing strategy that determines how much to invest in a
product by figuring out how much customers will pay and subtracting an
amount for profit.
vi. Prestige pricing: Practice of setting a price artificially high to foster the
impression that it is a product of high quality.
vii. Odd even pricing: Practice of pricing products a few cents (or dollars)
under an even number.
3. Placing

Distribution: All activities involved in getting the right quantity of a product to the right
customer at the right time and at a reasonable cost.
a. Distribution channel:
i. Producer > Customer
ii. Producer > Retailer > Customer
iii. Producer > Wholesaler > Retailer > Customer
b. Physical distribution: The responsibility for getting its products to customers.
i. Warehousing
ii. Material Handling (Automation & Just in time production)
c. Transportation
d. Supply Chain: The flow from purchasing of raw material to selling products.
i. process:
1. Purchasing managers buy raw materials from suppliers
2. Other operations managers transform these raw materials, or
ingredients, into product
3. Operations managers in shipping send completed packages to a

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warehouse where they’re stored for later distribution
4. Operations managers at the warehouse forward packaged products
to dealers around the world.
5. Retail dealers sell products to customers.

4. Promotion
a. Tools:
i. Advertising
ii. Personal selling
iii. Sales promotion
iv. Publicity & public relation

● Product life cycle

○ Once it’s developed, a new product is introduced to the market.
○ With any success at all, it begins to grow, attracting more buyers.
○ At some point the market stabilizes, and the product becomes mature.
○ Eventually, its appeal diminishes, and it’s overtaken by competing brands or
substitute products. Sales decline and it’s ultimately taken off the market.

● Marketing environment
○ Political & regulatory
○ Economic
○ Competitive
○ Technological
○ Social & cultural

● Consumer Behavior: Decision process that individuals go through when purchasing

or using products.

● Buying process
○ Need recognition
○ Info search
○ Evaluation
○ Purchase
○ Post purchase evaluation

● Buying influence

Psychological Social

■ Motivation ■ Family
■ Perception ■ Reference group
■ Learning ■ Economic & social status
■ Attitudes ■ Culture
■ Personality

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