Lesson+5

Chapter 5 Concepts


Freedom to make business decsions Owner keeps all the profits Pride of Ownership Long hours and hard work Unlimited risks/Unlimited liability Limited life of the business
 * Sole propriertorship**-a business owned by only one person. 70% of all businesses are sole proprietorships.
 * Advantages:** Ease of starting
 * Disadvantages**:Limited Sources of funds

Additional Sources of funds Availability of different talents Profits are shared among several owners Potential for disagreement among owners Business can dissolve suddenly
 * Partnership**-a business owned by two or more people, but is not incorporated.
 * Advantages**: Ease of creation
 * Disadvantages:** Partners are liable/Unlimited liability

corporations raises money for business activities through the sale of **stock** to companies or individuals who want to be part owners of the company. The owners are called stockholders or shareholders. Fixed financial liability to owners(not unlimited); limited liability Specialized management Unlimited life of the company Owners have limited control Double taxation(individuals and corporations)
 * Corporation**-a business that operates as a legal entity seperate form its owners and has many owners. Corporations make 90% of all the sales in the United States.
 * Dividend**--a share of the company's profits
 * Advantages:** More sources of funds
 * Disadvantages**: Difficult creation process(must apply for a **charter**--a document granted by the government)


 * Special Forms of Business Organization**


 * Municipal Corporation**-an incorporated city or town organized to provide services for citizens rather than to make a profit.
 * Non-profit Corporations**-created to provide a service and not to make a profit. Examples are churches and many charities. Many non-proft corporations are involved in multinational activities, such as the Red Cross and the Salvation Army.
 * Cooperativ**e-a business owned by its members and operated for its benefit. Any profits are returned to the members.

Characteristics: 1. Woldwide Market View 2. Standardized Product 3. Culturally Sensitive Hiring 4. International and Local Perspective
 * Multinational Company or Corporation(MNC**)

Concerns: 1. Host country might become dependent on the company if it is a major part of thier economy 2. MNC can begin to influence and control country's politics.


 * Starting Global Business Activities**
 * Indirect Exporting-a company sells its products in a global market without really trying, casually, or by accident. It is not a major part of their core operations.**
 * Direct Exporting-a company actively seeks and conducts an exporting business from the United States.**
 * Management Contract-a company sells only its management skills and not a product**
 * Licensing-selling the right to use a company's property(process, trademark, or brand name) for a fee or royalty**
 * Franchise-the right to use a company name and business process in a specific way**
 * Joint Venture-an agreement between two or more companies from different countries to share a business project**
 * Foreign Direct Investment-a company buys land or resources in another country.**
 * Wholly Owned subsidiary-an independent company operating in another country that is owned by a parent company.**