BQS303 Global Ownership Sme Williams Lessons - 5 72016

Lesson five
Globalization
© Dr Kitiabi 2016/2017
Chapter Learning Objectives
4-2
 The chapter learning objectives for Chapter 4 are described in

this slide and each comes with an essential question. These key
ideas are outlined below:
 Globalization: The Shrinking of Time and Distance - What are

three developments in globalization that will probably affect me?
 Why and How Companies Conduct International Trade - Why do
companies expand internationally, and how do they do it?
 Conditions Affecting International Trade - What factors should I
be aware of that affect international markets?
 International Trade: Barriers and Facilitators - What are barriers
to free trade, and what international organizations are designed
to promote trade?
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

4-3
 Globalization: The Shrinking of Time

and Distance
 Why and How Companies Conduct
International Trade
 Conditions Affecting International Trade
 International Trade: Barriers and
Facilitators

The Global Workplace & E-Commerce
4-4
 Globalization: The results

 Development of the global workplace and
electronic commerce
 Consolidation of many national markets into one big
world market
 Development of two opposite kinds of international
business: huge firms and quick, Internet-enabled
small firms.
 E-commerce

The Global Workplace & E-Commerce
4-5
 Globalization is the increasing connectivity and

interdependence of the world’s economies, societies,
and cultures because of advances in communication,
technology, trade, international investment, movement
of currency, and migration.
 The technology of the Web allowed the development
of e-commerce, or electronic commerce, the buying
and selling of products and services through computer
networks. Total U.S. e-commerce retail sales were
estimated at $43.7 billion in mid-2011.E-commerce is
a growing trend that opens up the markets to
anywhere in the world.
One Big Market
4-6
 Free Trade & the

Global Economy
 Imports
 Exports
 Positive Effects
 Negative Effects
 Types of Businesses
that Succeed
 Big
 Quick
Conducting International Trade
4-7
 Trading with other countries

 No country is self-sufficient
 Some countries have natural resources other
countries do not have
 Some countries have technology that other
countries want
 Competitive advantage
 Absolute
advantage
 Comparative advantage

Balance of Trade, Payments & Countertrading
4-8
 Balance of Trade: Comparing exports &

imports
 Trade surplus
 Trade deficit
 Balance of Payments: Comparing money in &
money out
 Balance-of-payments surplus
 Balance-of-payments deficit
 Countertrading

How Companies Enter Foreign Markets
4-9

Conditions Affecting International
Trade
4-10
 Cultural Conditions
 Verbal & nonverbal communication
 Time orientation
 Religion
 Economic Conditions
 Infrastructure, resources
& development
 Currency exchange rates

Conditions Affecting International
Trade
4-11
 Political & Legal Conditions

 Political System: Democratic or Totalitarian?
 Political Stability: What’s the Risk?
 Approach to Corruption & Enforcement

Barriers to International Trade
4-12
Three Kinds of Trade Protectionism:

 Tariffs – taxes on imports
 Import Quotas – limits on how many products
are allowed in
 Embargoes – bans on certain import or export
products

Organizations & Common Markets
4-13
 Organizations Facilitating International Trade:

 The World Trade Organization (WTO)
 The World Bank
 The International Monetary Fund (IMF)
 Common Markets
 NAFTA
 EU
 Mercosur
 APEC

Learning Objectives Summary
4-14
 Globalization
 Companies Conducting International Trade
 Conditions Affecting International Trade
 Barriers and Facilitators Affecting
International Trade

Lesson six
STARTING & GROWING A
SUCCESSFUL BUSINESS
©Dr Kitiabi 2016/2017
Forms of Business Ownership
5-16
 Basic Forms of Business Ownership

 Franchises & Special Forms of Ownership
 Mergers & Acquisitions

Basic Forms of Ownership
5-17

Sole Proprietorships
5-18
 Benefits
 You can start up the business with ease
 You can make all your own decisions
 You get to keep all the profits
 Your taxes are relatively simple
 You can close the business with ease
 Drawbacks
 You have unlimited financial liability
 You have limited financial resources & few fringe benefits
 You have limited management resources
 You will be investing a lot of time in the company
 Many businesses end when the owner dies or retires

Partnerships
5-19
 Four Types  Advantages

 General  Ease of start up
 Increased financial
 Limited resources
 Master Limited  Increased management
 Limited Liability resources
 Taxes are simple
 Drawbacks
 Personality or
partnership conflicts
 Unlimited liability
 Hard to end or pass
along partnerships
Corporations
5-20

Corporations
5-21
 Advantages
 Little or no liability
 Possible tax breaks
 Increased financial resources
 More managerial expertise
 Ease of selling
 Drawbacks
 Lots of start-up paperwork and costs, some on-going
 Can be taxed twice
 Need to publicly disclose financial information
 Tough to end the corporation

Cooperatives
5-22
 Limits the power of each shareholder

 Less about profit, more about providing a
service
 Over 460,000 in the U.S. today
 Includes some Fortune 500 companies, like
Ace Hardware and Sunkist
 Shareholders elect their own board of
directors

Franchises
5-23
 A franchise is an
arrangement in
which a business
owner allows others
the right to use its
name and sell its
goods or services
within a specific
geographical area.

Franchises – Benefits & Drawbacks
5-24
 Benefits of Franchising
 Own your own business
 Start your new enterprise with some name recognition
 Follow someone else’s proven formula for doing business
 Receive marketing support
 Receive management and financial support
 Drawbacks
 Large initial investment
 Need to share sales with franchisor
 Close management of franchisor
 Potential conflicts with franchisor
 Inflated expectations of return on investment
Mergers and Acquisitions
5-25
 How to Grow
 Internal expansion
 External expansion
 Merger
 Acquisition
 Why Mergers & Acquisitions Occur

 Shortcut to growth
 Management talent
 Saving money
 Tax benefits
Mergers and Acquisitions
5-26
 Types of strategic mergers

 Horizontal: same industry, same activity
 Vertical: same industry, different activities
 Conglomerate: different industries, different activities
 Unfriendly mergers
 Hostile takeovers
 Tender offer & Proxy fight
 “White Knights” & “Poison pills”
 Borrow & Buy Strategies

 Leveraged buyout
 Employee buyout

5-27
 Basic Forms of Business Ownership

 Franchisees
 Mergers & Acquisitions

5-28
Lesson seven
©Dr Kitiabi 2014
STARTING & GROWING A

SUCCESSFUL BUSINESS
The Entrepreneurial Spirit

6-30
 Small Business and Entrepreneurship

 The World of Small Business
 Starting Up: From Idea to Business Plan
 Getting Financing
 Achieving Success in Small Business

6-31
 The chapter learning objectives for

chapter six are described in this slide,
each will address an essential question
as follows:
 Small Business & Entrepreneurship: The

Art of the Quick - Do I have what it takes
to be a small-business entrepreneur?

6-32
 The World of Small Business - How important

is small business, and what newer types
might interest me?
 Starting Up: From Idea to Business Plan - If I
wanted to start a company, how should I go
about it?
 Getting Financing - What are various ways of
financing my new business?
 Achieving Success in a Small Business - How
can I avoid failure and keep my business
healthy?
6-33
 Small Business and Entrepreneurship

 The World of Small Business
 Starting Up: From Idea to Business Plan
 Getting Financing
 Achieving Success in a Small Business

6-34
 The main themes in lesson 7 are to

cover small business and
entrepreneurship, look at the world
of small business, discuss starting a
new business all the way from
conceptualizing the idea to the
business plan and then getting
financing
6-35
 Some of the key themes and essential questions

we discussed are as follows:
 Small Business & Entrepreneurship: The Art of the

Quick - Do I have what it takes to be a small-
business entrepreneur?
 The World of Small Business - How important is
small business, and what newer types might
interest me?

6-36
 Some of the key themes and essential questions

we discussed are as follows:
 Starting Up: From Idea to Business Plan - If I
wanted to start a company, how should I go about
it?
 Getting Financing - What are various ways of
financing my new business?
 Achieving Success in a Small Business - How can I
avoid failure and keep my business healthy?

Small Business & Entrepreneurship
6-37
 Micropreneurs
 Small Business Owners
 Entrepreneurs
 Types of Entrepreneurs
 Classic
 Intrapreneurs
 Entrepreneurial Teams

6-38
 Some call small-business owners micropreneurs—

those who take the risk of starting and managing a
business that remains small (often home-based), lets
them do the kind of work they want to do, and offers
them a balanced lifestyle.
 Small businesses and entrepreneurship may be the
key factor in moving the United States out of the
current economic crisis. The two are similar but have a
critical difference: the small business owner is seeking
to stay small and make a living, while the entrepreneur
desires to develop a new idea into a big company.

6-39
 Entrepreneurs are business owners who, in the

classic meaning of the term, see a new opportunity
for a product or service and start firms that may lead
to a high-growth business—those who become the
“millionaires next door.”
 There are three main types of entrepreneurs:

 The classic entrepreneur meets the definition we
gave above for entrepreneur. A classic entrepreneur
is an individual who sees a new opportunity for a
product or service and starts a firm that can lead to a
high-growth business.
6-40
 An intrapreneur is someone who works inside an

existing organization who sees an opportunity for a
product or service and mobilizes the organization’s
resources to try to realize it.
 An entrepreneurial team is a group of people with
different kinds of expertise who form a team to
create a new product. One variant is the skunkworks,
a team whose members are separated from the
normal operation of an organization and asked to
produce a new, innovative project.

6-41
 Small businesses and entrepreneurship may be the key

factor in moving the United States out of the current
economic crisis. The two are similar but have a critical
difference: the small business owner is seeking to stay
small and make a living, while the entrepreneur desires
to develop a new idea into a big company.
 According to the Small Business Administration, a small
business is defined by the U.S. government as a business
that is (a) independently owned and operated, (b) is not
dominant in its field of operation, and meets certain
criteria set by the SBA for (c) number of employees and
(d) annual sales revenue.
 Entrepreneurs are business owners
6-42
 How do people become entrepreneurs?

 Opportunity vs. Necessity
 Do you have what it takes to be an entrepreneur?

 High Self-Confidence & Belief in Personal Control
 High Need for Achievement & Action Orientation
 High Tolerance for Ambiguity & Risk
 High Energy Level

6-43
 Opportunity and necessity are two driving forces for

entrepreneurs:
 Most entrepreneurs are opportunity entrepreneurs,
those who are ambitious and start their own
businesses in a voluntary pursuit of opportunity.
 Others are necessity entrepreneurs, people who
suddenly must earn a living and are simply trying to
replace lost income.
 Some characteristics that are helpful for those who

want to become entrepreneurs are:

6-44
 Some characteristics that are helpful for those who

want to become entrepreneurs are:
 A high level of confidence and belief in the ability to
control their own destinies. Entrepreneurs also tend
to have a high need for achievement and are very
action-oriented.
 A high tolerance for ambiguity and risk will be
helpful, as the entrepreneurial world is constantly
changing and filled with risks.
 Given the great amount of work it takes to get a
business off the ground, a high energy level is also an
advantageous characteristic for an entrepreneur.
The World of Small Business
6-45
 Contributions of Small
Business
o Employment
o Job creation
o First jobs for new employees
o Innovation
 Types of Small
Businesses
 Home-based
 Web-based

6-46
 Small businesses contribute much to our

economy:
 They provide almost half the jobs in the
economy and represent the majority of
employers.
 They also add new jobs to the economy at
a greater quantity than other types of
businesses.
 Most new job entrants find their first jobs
in small businesses.
 They also tend to be the innovators in
their fields, as they are small enough to
move quickly.
6-47
 Two areas that are growing are home-based business

and web-based businesses:
 Home-Based Businesses:
 Freelance work
 Direct sales
 Customer service
 Transcription service
 Tutoring

6-48
 The challenges of working at home include:

 Dress for work
 Set a routine and stick to it
 Keep work and family stuff on separate
computers
 Interact with other professional, or networking:
the process of establishing and maintaining
connections with professionals and managers in
your field to help you advance in your career.
6-49
 Web-Based Business Benefits:
 Simple and reliable servers
 Speedy wireless networks
 A sophisticated economic infrastructure
 Facebook tools for reaching local customers
 Contributions of Small Business
o Employment
o Job creation
o First jobs for new employees
o Innovation
 Types of Small Businesses

 Home-based
 Web-based
6-50
 Two areas that are growing are home-based business

and web-based businesses:
 Home-Based Businesses:
 Freelance work
 Direct sales
 Customer service
 Transcription service
 Tutoring
 The challenges of working at home include:
6-51
 There are many reasons to buy a small business instead of

starting a new one:
 Buying an existing business can help to reduce uncertainty
because a lot of the factors of a businesses are already
known.
 Since it is a known entity, it can generate profits quickly.
 When buying a new business, it is important to look over the

details of how the business works.
 Also, knowing why the owner is selling will help to avoid an
owner opening up an immediate competing business.
 In order to negotiate the right price, you will want to look
carefully at the books, probably with a financial consultant,
to find out what the business is truly worth.

6-52
 There are many reasons why someone

would want to sell a business, including:
 Make money
 Beaten by competitors
 Tired of running the business
 Health problems

6-53
 Owning Your Own Business: Buy or Start?

 Buying: reduces uncertainty & generates profits quickly
 Looking Over & Negotiating an Existing Business
 How does the business work?
 Why is the owner selling?
 Is the price right?
 Selling your business: Reasons
 Make money
 Beaten by competitors
 Tired of running the business
 Health problems

Starting Up
6-54
 It Begins with an Idea

 Learning about Business, Getting Experience
Step 1: Read about business
Step 2: Talk to knowledgeable people
 Mentors
 SCORE
 ACE
 Trade Associations
Step 3: Get experience

Starting Up
6-55
 The key to starting a new business is coming

up with the idea that will provide a good
opportunity. Once you have a good idea, there
are three steps you should follow as outlined on
this slide:
1. Research the business concept
2. Talk to knowledgeable people in the field:
 Mentors: an experienced person who coaches

and guides lesser-experienced people by
helping them understand an industry or
organization’s culture and structure.
Starting Up
6-56
 Service Corps of Retired Executives (SCORE): consists of

retired executives who volunteer as consultants to advise
small-business people
 Active Corps of Executives (ACE): composed of
executives who are still active in the business world but

have volunteered their time and talents
 Trade Associations: consist of individuals and companies
in a specific business or industry organized to promote

common interests
 3. Get experience in the field
 Once you have taken these steps you need to write a

business plan
Copyright toPearson
© 2013 beEducation,
ableInc.to adequately
Publishing as Prentice Hall communicate your
Starting Up – The Business Plan
6-57
 What is a Business Plan?

 Why Write a Business Plan?
 Help you get financing
 Help you think through important details
 Help you plan for success
 How Do You Conceptualize It?
 The business model
 Is It Really Necessary? Reasons Why Not:
 May need to act fast
 May be able to get financing without one
 Many firms have done well without one

6-58
 A business plan is a document that outlines a proposed

firm’s goals, methods for achieving them, and standards
for measuring success.
 Why Write a Business Plan?

 A good business plan will help you get financing, think
through important details and make a plan for success.
 How Do You Conceptualize a Business Plan?:

 What’s the basic idea behind my business? The business
model—the need the firm will fill, the operations of the
business, its components and functions, as well as its
expected revenues
Copyright © 2013 Pearson Education,and expenses
Inc. Publishing as Prentice Hall .
6-59
 What kind of industry am I entering, and how is my idea

different?
 How will I market to customers?
 What qualifies me to run this business?
 How do I propose to finance the business?
 Is It Really Necessary to Create a Formal Business

Plan? The Reasons Why Not:
 You May Need to Act Fast to Get the Business Going.
 You May Be Able to Get Financing without a Full Formal
Plan.
 Many Firms Have Done Well without a Business Plan.
Getting Financing
6-60
 Personal Savings, Credit Cards & Second Mortgages

 Family & Friends
 Supplier & Barter Arrangements
 Financial Institutions
 Small Business Administration–Backed Loans
 Angel Investors & Venture Capitalists
 Public Stock Offerings
 Other Funding Sources
 Incubator
 Enterprise zone

Getting Financing
6-61
 There are many ways to finance a new business

that vary in risk and capacity:
 The first is to utilize personal funds such as
credit cards, savings or loans.
 Family and friends are often a source of funding
for new business owners.
 A business’s suppliers may make barter
arrangements to help a new business get
inventory and pay for it later.

Getting Financing
6-62
• Short-Term Credit: A supplier might provide you with

short-term credit, giving you 30 to 45 days to pay for
supplies or services.
• Extended-Payment Plan: With heavy-duty machinery,
such as trucks and computers, the supplier may give
you an extended-payment arrangement, allowing you
three to five years to pay for purchases.
• Barter Arrangements: To trade goods or services
without the exchange of money is another option, as in
trading your old Ford F-150 pickup to a roofer for
replacing your restaurant’s roof.

Getting Financing
6-63
 Angel investors are defined as individuals who

invest their own money in a private company,
typically a start-up.
 Venture capitalists are generally companies,
not individuals, who invest in new enterprises
in return for part ownership of them.
 Public stock offerings provide additional funds
but it is basically selling your company to
others, so you lose a lot of management
freedom and potential profits.
Getting Financing
6-64
 “Going public” means that a privately owned

company becomes a publicly owned company
by issuing stock for sale to the public.
 Some other ways to get help is to place your
business in an incubator, a facility that offers
small businesses low-cost offices with basic
services. An enterprise zone is a specific
geographic area in which government tries to
attract business investment by offering lower
taxes and other government support.
Achieving Success in a Small Business
6-65
 Why small businesses fail

 Inadequate management skills
 Lack of financial support
 Difficulty hiring & keeping good employees
 Aggressive competition
 Government paperwork
 How to keep a small business healthy
 Keep good records & know when to ask for help
 Stay in tune with your customers
 Learn how to manage employees

6-66
 Many small businesses fail for many reasons. Small

businesses are more apt to fail than big businesses
are. Often this is because they are taking more risks—
selling products that are new and untried. But there are
also at least five other reasons, as follows:
 Inadequate Management Skills
 Lack of Financial Support
• Lack of credit
• Unfavorable Economies of Scale—the savings realized
from buying materials or manufacturing products in
large quantities.
6-67
 Difficulty Hiring & Keeping Good Employees

 Aggressive Competition
 Government Paperwork
 How to Keep a Small Business Healthy
 Staying in business means constantly staying on
your toes. Some suggestions are:
 Keep Good Records & Know When to Ask for
Help
 Stay in Tune with Your Customers
 Learn How to Manage Employees
6-68 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
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Lesson five

 The chapter learning objectives for Chapter 4 are described in

 Globalization: The Shrinking of Time and Distance - What are

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Globalization: The Shrinking of Time

 International Trade: Barriers and

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Globalization: The results

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Globalization is the increasing connectivity and

 Free Trade & the

 Trading with other countries

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Balance of Trade: Comparing exports &

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Political & Legal Conditions

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Three Kinds of Trade Protectionism:

 Import Quotas – limits on how many products

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Organizations Facilitating International Trade:

 The International Monetary Fund (IMF)

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Basic Forms of Business Ownership

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Four Types  Advantages

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Limits the power of each shareholder

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Why Mergers & Acquisitions Occur

 Types of strategic mergers

 Borrow & Buy Strategies

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Basic Forms of Business Ownership

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

STARTING & GROWING A

The Entrepreneurial Spirit

 Small Business and Entrepreneurship

 Starting Up: From Idea to Business Plan

 Achieving Success in Small Business

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 The chapter learning objectives for

 Small Business & Entrepreneurship: The

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 The World of Small Business - How important

 Small Business and Entrepreneurship

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 The main themes in lesson 7 are to

 Some of the key themes and essential questions

 Small Business & Entrepreneurship: The Art of the

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Some of the key themes and essential questions

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 Some call small-business owners micropreneurs—

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall