Business Organizations
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Transcript of Business Organizations
Business OrganizationsBusiness OrganizationsChapter Chapter
3http://www.youtube.com/watch?v=pPVkG9krOMI
Sole ProprietorshipSole Proprietorship
A business that is owned and managed by A business that is owned and managed by one individual who receives all the profits one individual who receives all the profits and bears all the losses.and bears all the losses.
Most common form of business Most common form of business organization BUT third in sales, & profits.organization BUT third in sales, & profits.
Sole ProprietorshipSole Proprietorship
BenefitsBenefits Easy to start and go out Easy to start and go out
of businessof business Control over profits and Control over profits and
business operationsbusiness operations Pride of ownershipPride of ownership Personal freedomPersonal freedom Lower taxes – no Lower taxes – no
corporate taxescorporate taxes Easy to manage/flexibleEasy to manage/flexible
CostsCosts Unlimited liability – owner Unlimited liability – owner
responsible for all losses responsible for all losses and debtsand debts
Difficulty in raising Difficulty in raising financial capital – banks financial capital – banks don’t like to lend to small don’t like to lend to small businessbusiness
Management knowledge Management knowledge may be limitedmay be limited
Size and efficiencySize and efficiency Difficult to attract qualified Difficult to attract qualified
employeesemployees Limited LifeLimited Life
PartnershipPartnership
A business that is owned and managed by A business that is owned and managed by two or more individuals who receive all the two or more individuals who receive all the profits and bear all the losses.profits and bear all the losses.
Least most common form of BO Third, 2Least most common form of BO Third, 2ndnd in in sales & profitsales & profit
2 types:2 types: General-General-
All partners are responsibleAll partners are responsible Limited ($ilent partner)- Limited ($ilent partner)-
One partner is NOT active in daily business but gave One partner is NOT active in daily business but gave money to start the businessmoney to start the business
PartnershipPartnership
BenefitsBenefits Easier to raise financial Easier to raise financial
capitalcapital Partners may combine Partners may combine
managerial skillsmanagerial skills Personal satisfactionPersonal satisfaction Lower taxes – no Lower taxes – no
corporate income taxcorporate income tax Ease of establishmentEase of establishment Ease of efficiency (more)Ease of efficiency (more) Easier to attract qualified Easier to attract qualified
workersworkers
CostsCosts Unlimited liabilityUnlimited liability Shared profitsShared profits Possible conflicts Possible conflicts
between partnersbetween partners Possible instability after Possible instability after
death of a partnerdeath of a partner Limited lifeLimited life
CorporationCorporation
A business that is owned and operated by A business that is owned and operated by stockholders and has rights and stockholders and has rights and responsibilities as if it were a person; responsibilities as if it were a person; Organized and recognized by lawOrganized and recognized by law
Second most common form of BO, first in Second most common form of BO, first in sales & profits!sales & profits!
CorporationCorporation
BenefitsBenefits Limited liability- corporation Limited liability- corporation
NOT owners is responsible NOT owners is responsible for debtfor debt
Greater financial capital – Greater financial capital – stocks, bondsstocks, bonds
Unlimited lifeUnlimited life Specialized managementSpecialized management Ease of transferring Ease of transferring
ownership – ownership – stockhttp://www.youtube.costockhttp://www.youtube.com/watch?m/watch?v=5BsOF1uJZnQ&feature=rv=5BsOF1uJZnQ&feature=relatedelated
CostsCosts Increased taxationIncreased taxation Difficulty in startingDifficulty in starting May be larger, more May be larger, more
bureaucratic than other bureaucratic than other forms of businessforms of business
Increased governmental Increased governmental controlcontrol
Expansion of businessExpansion of business
2 ways:2 ways: Reinvestment-Reinvestment- by putting some of its profits by putting some of its profits
back into acquiring more of the factors of back into acquiring more of the factors of production to produce more and therefore sell production to produce more and therefore sell more and even bigger profits!more and even bigger profits!
MergerMerger – a combination of two or more – a combination of two or more businesses to form a single firmbusinesses to form a single firm
http://www.youtube.com/watch?http://www.youtube.com/watch?v=21aLv9KluQsv=21aLv9KluQs
Reasons for mergingReasons for merging
EfficiencyEfficiency Standardize procedures; volume purchases; effective Standardize procedures; volume purchases; effective
use of advertisinguse of advertising Eliminate rivalsEliminate rivals
Royal Caribbean Cruises acquired Celebrity Cruise Royal Caribbean Cruises acquired Celebrity Cruise Lines in 1997 and doubled in sizeLines in 1997 and doubled in size
* may be blocked by FTC – Staples not allowed to * may be blocked by FTC – Staples not allowed to acquire Office Depotacquire Office Depot
Lose corporate identityLose corporate identity ValuJet merged with AirWays to form Airtran Holdings ValuJet merged with AirWays to form Airtran Holdings
Corp. after 1996 Everglades crash killing 110 Corp. after 1996 Everglades crash killing 110 peoplehttp://www.youtube.com/watch?peoplehttp://www.youtube.com/watch?v=hi76RCghZVM&feature=relatedv=hi76RCghZVM&feature=related
Types of MergersTypes of Mergers
HorizontalHorizontal 2 or more firms produce the same kind of product join 2 or more firms produce the same kind of product join
forcesforces Ex: merger of two banks (Wachovia and First Union)Ex: merger of two banks (Wachovia and First Union)
http://www.youtube.com/watch?NR=1&v=XmOFbk1aVbwhttp://www.youtube.com/watch?NR=1&v=XmOFbk1aVbw
VerticalVertical Firms involved in different steps of Firms involved in different steps of
manufacturing/marketing come togethermanufacturing/marketing come together Ex: merger of a steel company and a car manufacturerEx: merger of a steel company and a car manufacturer http://www.youtube.com/watch?http://www.youtube.com/watch?
v=KuRWcgwXcdA&feature=relatedv=KuRWcgwXcdA&feature=related
ConglomeratesConglomerates
Firm that has at least 4 businesses, each Firm that has at least 4 businesses, each making unrelated products, none of which is making unrelated products, none of which is responsible for a majority of salesresponsible for a majority of sales
Formed out of corporations that become so Formed out of corporations that become so large through mergers and acquisitionslarge through mergers and acquisitions
Main reason: Diversification – “don’t put all your Main reason: Diversification – “don’t put all your eggs in one basket” philosophyeggs in one basket” philosophy
Ex: KFC fast-food restaurant; fruit and vege. Ex: KFC fast-food restaurant; fruit and vege. processor Del Monte and Heublin – wine processor Del Monte and Heublin – wine producer and distributorproducer and distributor
http://www.youtube.com/watch?v=6DslMsrbAAAhttp://www.youtube.com/watch?v=6DslMsrbAAA
MultinationalsMultinationals
Corporation that has manufacturing or Corporation that has manufacturing or service operations in a number of different service operations in a number of different countriescountries
Tax Status: Likely to pay taxes in each Tax Status: Likely to pay taxes in each country it has operations incountry it has operations in
Multinationals Cont.Multinationals Cont.
StrengthsStrengths Help spread new technology worldwideHelp spread new technology worldwide Generate new jobs in areas where jobs are neededGenerate new jobs in areas where jobs are needed Produce tax revenues for host countryProduce tax revenues for host country
WeaknessesWeaknesses b/c large and powerful, influence political life in host b/c large and powerful, influence political life in host
nationnation May exploit the economy of host nation by paying May exploit the economy of host nation by paying
workers low wages, by exporting scarce natural workers low wages, by exporting scarce natural resources, or by adversely interfering with the resources, or by adversely interfering with the development of local businessdevelopment of local business
Takes away jobs at homeTakes away jobs at home
GovernmentGovernment
Direct Role – produces and distributes goods Direct Role – produces and distributes goods and services to peopleand services to people National defenseNational defense Police, fire, schools, courts, etc.Police, fire, schools, courts, etc.
Indirect Role – acts as an umpire to make sure Indirect Role – acts as an umpire to make sure the market economy operates by the rulesthe market economy operates by the rules Public utilities – no competition = gov. regulationPublic utilities – no competition = gov. regulation Financial aidFinancial aid Social SecuritySocial Security
CooperativesCooperatives
Voluntary association of people formed to Voluntary association of people formed to carry on some kind of economic activity carry on some kind of economic activity that will benefit its members due to lack of that will benefit its members due to lack of it in their particular area:it in their particular area: ConsumerConsumer ServiceService ProducerProducer
Non-Profit OrganizationNon-Profit Organization
Work to make the best use of scarce Work to make the best use of scarce resources. resources.
Non profit organizations do not seek Non profit organizations do not seek financial gain for their membersfinancial gain for their members
Consumer CooperativeConsumer Cooperative
Voluntary association that buys bulk Voluntary association that buys bulk amounts of goods on behalf of its amounts of goods on behalf of its membersmembers
Wants to provide members lower pricesWants to provide members lower prices
Service CooperativeService Cooperative
Deals with services rather than goodsDeals with services rather than goods Offer members insurance, credit, and Offer members insurance, credit, and
other servicesother services
Producer CooperativeProducer Cooperative
Helps members sell their productsHelps members sell their products FarmersFarmers
Labor UnionsLabor Unions
Organization formed to work for its Organization formed to work for its members’ interests in various employment members’ interests in various employment mattersmatters
Negotiate with management for better pay, Negotiate with management for better pay, working conditions, vacation, etc.working conditions, vacation, etc.
Professional AssociationsProfessional Associations
Group of people in a specialized Group of people in a specialized occupation that works to improve the occupation that works to improve the working conditions, skill levels, and public working conditions, skill levels, and public perceptions of the professionperceptions of the profession
Teachers/ProfessorsTeachers/Professors LawyersLawyers
Business AssociationsBusiness Associations
Organize to promote their collective Organize to promote their collective interestinterest
Chamber of Commerce – (most cities and Chamber of Commerce – (most cities and towns have) promotes the welfare of its towns have) promotes the welfare of its members and the communitymembers and the community
Better Business Bureau – help to protect Better Business Bureau – help to protect the consumer, provides information on the consumer, provides information on companiescompanies