WHY ARE THERE BUSINESS FIRMS? The incentive to earn an income, coupled with a demand for goods and services, creates a willingness to start a firm. A firm can provide income, self-worth, and community needs.

THE ROLE OF ENTREPRENEURS Entrepreneurs can be inventors and/or innovators.

What makes a good entrepreneur?

WHAT MAKES A SUCCESSFUL ENTREPRENEUR Visionary— sees a business opportunity when others may not Innovative— transforms ideas into new products, processes, or businesses Willing to take risks— puts savings and reputation on the line by starting a new venture Optimistic— is realistic but confident of business success; Self-motivated— is disciplined and persistent willing, and able to solve problems Attentive— learns from experts, colleagues, and customers and recognizes and adapts to market conditions Organized— coordinates and manages resources efficiently

IMAGINE YOU’RE AN ENTREPRENEUR “The Tutor Shop” 1. How would you earn revenue? 2. Would you collect a fee from the tutor after each session with a student? 3. Would you charge the tutors a one- time fee when you first connect them to each student? 4. How would you find and recruit good tutors? 5. How would you inform those who need tutors about the service?

SOLE PROPRIETORSHIPS A sole proprietorship is a business firm owned by one person, the proprietor. How to Start a Sole Proprietorship 1. Register the name of your business 2. Check and conform to regulations 3. Obtain any necessary licenses and permits. 4. Keep records and prepare tax forms.

SOLE PROPRIETORSHIPS 1. Easy start- up 2. Ease of decision making 3. Ownership of profits 4. Tax benefits 5. Intrinsic rewards 1. Burden of responsibility 2. Difficulty raising funds 3. Unlimited liability Advantages of Sole Proprietorships Disadvantages of Sole Proprietorships

A partnership is a for-profit business firm owned by two or more people, called partners, each of whom has a financial interest in the business. PARTNERSHIPS Small businesses like retail stores, restaurants and contractors may operate as partnership. Large law firms, medical practices and business consulting firms will most often be organized as partnerships.

PARTNERSHIPS Advantages of Partnerships 1. Larger pool of financing 2. Shared decision making. Disadvantages of Partnerships 1. Unlimited liability for general partners 2. Disagreements among partners

A corporation is a business firm that is itself a legal entity. Corporations Owned by stockholders who purchase stock. The shares of stock represent ownership. A private corporation is owned by one person or a small group of individuals. Public corporations are held by many people and can be freely bought and sold.

Advantages of Corporations 1. Limited liability for stockholders 2. Ability to raise funds by issuing shares 3. Ability to raise funds by issuing bonds 4. Rapid growth Disadvantages of Corporations 1. Expensive start- up costs 2. Delays in decision making 3. Low nonmonetary rewards 4. Divided ownership of profits 5. Tax treatment 6. More reporting requirements Corporations

THE THREE MAJOR BUSINESS TYPES: AN OVERVIEW

COMPARING THE COMMON TYPES OF BUSINESS ORGANIZATIONS

OTHER TYPES OF BUSINESS ORGANIZATIONS A limited liability company (LLC) is a hybrid business organization that combines features of corporations, partnerships, and sole proprietorships. A business franchise consists of a parent company and numerous associated businesses that sell a standardized good or service. A cooperative, or coop, is a business owned by its members and operated to supply members and others with goods and services. A nonprofit organization is a legal entity formed to carry out a “not- for- profit” mission.

GROWTH FROM REINVESTING PROFITS

GROWTH FROM OUTSIDE FUNDING A firm can borrow funds by: …issuing and selling bond …issuing and selling new shares of stock.

MERGERS AND ACQUISITIONS A merger occurs when two firms legally join together to form a single, larger firm. An acquisition is the purchase by one firm of a controlling interest in another firm. A horizontal merger combines two firms that produce the same type of product. A vertical merger combines firms that operate at different stages in the production of a good.

MERGERS AND ACQUISITIONS A conglomerate is a single business enterprise formed by combining firms from unrelated industries.

GOING GLOBAL A multinational corporation is a company that operates in more than one country.

GOING GLOBAL

THE VALUE OF “DOING RIGHT” Business ethics is the examination of standards for “right” and “wrong” behavior by firms. Business Ethics in the 2000s: -Corporate Scandals -Financial Crisis of 2008

BUSINESS ETHICS AT THE FIRM Ethical businesses do the following… Develop a clear vision of company values and mission Publish a “code” of business conduct Conduct ethics training programs Reward employees who exhibit ethical behaviors Obey national and international laws.

CORPORATE SOCIAL RESPONSIBILITY IN THE GLOBAL ECONOMY Globalization is the broadening access to products, people, businesses, technology, ideas, and money across national borders to create a more integrated and interdependent global economy. Corporate social responsibility (CSR) refers to the duties and obligations corporations have to different stakeholders.