Lynesse Pierre

Business Administration SIE

October: Outline/Summary
PART 1 - Business Trends: Cultivating a Business in Diverse, Global Environments
Chapter 3: Doing Business in Global Markets

*after reading every chapter, the reader is supposed to be able to respond to

the following statements in the boxes. this also works out as an outline and summary*

Section 3-1: Discuss the importance of the global market and the roles of
comparative advantage and absolute advantage in global trade.

Nations should trade with other nations because no nation is self-sufficient, other
countries need products that prosperous countries produce, and natural resources and
technological skills are not distributed evenly around the world.
The theory of comparative advantage contends that a country should make and
then sell those products it produces most efficiently but by those it cannot produce as
efficiently. Also, absolute advantage exists if a country produces a specific product more
efficiently than any other country. There are few examples of absolute advantage in the
global market today.

Section 3-2: Explain the importance of importing and exporting, and understand
key terms used in global business.

Even though it is not necessarily easy or simple, any product can be imported or
exported. Exporting is selling of products to other countries. Importing is buying products
from other countries. The balance of trade is the relationship of exports and imports. The
balance of payments is the balance of trade plus other money flows such as tourism and
foreign aid. Dumping is selling products for less in a foreign country than in our own
country.

Section 3-3: Illustrate the strategies used in reaching global markets and explain the role
of multinational corporations.

Some ways and strategies of entering world trade include licensing, exporting,
franchising, direct foreign investment, contract manufacturing and joint ventures and
strategic alliances.
Multinational corporations differ from other companies because unlike companies
that only export and import, multinational corporations also have manufacturing facilities
or physical presence abroad.

Section 3-4: Evaluate the forces that affect trading in global markets.

Forces that affect trading in global markets include sociocultural forces, economic
and financial forces, physical and environmental factors, and legal and regulatory forces.

Section 3-5: Debate the advantages and disadvantages of trade protectionism.

First off, trade protectionism is the use of government regulations to limit the
import of goods and services. Advocates believe it allows domestic producers to grow,
producing more jobs. The key tools and factors of protectionism are import quotas,
embargoes and tariffs.
An embargo prohibits the importing and exporting of certain products. Tariffs are
taxes on foreign products. Protective tariffs raise the price of foreign products and protect
domestic industries and revenue tariffs raise money for the government.
Now whether if trade protectionism is good for domestic producers, that is
debatable because it offers both pluses and minuses. And the reason why governments
still practice trade protectionism despite it having advantages and disadvantages is
because the theory of mercantilism started the practice and it has persisted ever since
even though it is in a weaker form.

Section 3-6: Discuss the changing landscape of the global market and the issue of
offshore outsourcing.

Offshore outsourcing is the purchase of goods and services from outside a firm
rather than providing them inside the company. Today, more businesses are outsourcing
manufacturing and services offshore. The reason why offshore outsourcing is a major
concern for the future is because many fear that growing numbers of jobs in the United
States will be lost due to offshore outsourcing and the quality of products produced could
be inferior.
Lynesse Pierre
Business Administration SIE
October: Outline/Summary
PART 1 - Business Trends: Cultivating a Business in Diverse, Global Environments
Chapter 4: Demanding Ethical and Socially Responsible Behavior

*after reading every chapter, the reader is supposed to be able to respond to

the following statements in the boxes. this also works out as an outline and summary*
 Section 4-1: Explain why obeying the law is only the first step in behaving ethically.

Ethics goes beyond obeying laws to include abiding by moral standards accepted
by society. Ethics reflects peoples proper relationships with one another. Legality is more
limiting: it refers only to laws written to protect people from fraud, theft, and violence.

Section 4-2: Ask three questions you need to answer when faced with a potentially
unethical action.

Three questions I would ask when faced with a potentially unethical action and
when wanting to put business decisions through an ethics check would be: (1) Is it legal?
(2) Is it balanced? And (3) How will it make me feel?

Section 4-3: Describe managements role in setting ethical standards.

Managers often set formal ethical standards, but more important are the messages
they send through their actions. Managements tolerance or intolerance of ethical
misconduct influences employees more than any written ethics codes.

Section 4-4: Distinguish between compliance-based and integrity-based ethics codes,

and list the six steps in setting up a corporate ethics code.

Whereas compliance-based ethics codes are concerned with avoiding legal

punishment, integrity-based ethics codes define the organizations guiding values, create
an environment that supports ethically sound behavior, and stress a shared accountability
among employees.

Section 4-5: Define corporate social responsibility and compare corporations

responsibilities to various stakeholders.

Corporate social responsibility is the concern businesses have for society. Also,
businesses demonstrate responsibility to stakeholders by satisfying customers with goods
and services of real value, making money for investors, creating jobs for employees,
maintaining job security, and seeing that hard work and talent are fairly rewarded, and
finally creating new wealth for society, promoting social justice, and contributing to
making the businesses own environment a better place.
 Section 4-6: Analyze the role of U.S. businesses in influencing ethical behavior and
social responsibility in global markets.

Many U.S. businesses are demanding socially responsible behavior from their
international suppliers by making sure their suppliers do not violate U.S. human rights
and environmental standards. A company like Sears will not import products from
companies that do not meet their ethical and social responsibility standards.

Lynesse Pierre
Business Administration SIE
October: Outline/Summary
PART 2 Business Ownership: Starting a Small Business
Chapter 5: How to Form a Business

*after reading every chapter, the reader is supposed to be able to respond to

the following statements in the boxes. this also works out as an outline and summary*

Section 5-1: Compare the advantages and disadvantages of sole proprietorships.

The advantages of sole proprietorships include ease starting and ending, ability to
be our own boss, pride of ownership, retention or profit, and no special taxes. The
disadvantages include unlimited liability, limited financial resources, difficulty in
management, overwhelming time commitment, few fringe benefits, limited growth, and
limited life span.

Section 5-2: Describe the differences between general and limited partners, and compare
the advantages and disadvantages of partnerships.

General partnerships include the three key elements: common ownership, shared
profits and losses, and the right to participate in managing the operations of the business.
General partners are owners or partners who have unlimited liability and are active in
managing the company. Limited partners are owners or partners who have limited
liability and are not active in the company.
Unlimited liability means that sole proprietors and general partners must pay all
debts and damages caused by their business. They may have to sell their houses, cars, or
other personal possessions to pay business debts. Limited liability means that corporate
means that corporate owners (stockholders) and limited partners are responsible for
losses only up to the amount they invest. Their other personal property is not at risk.
Master limited partnership is a partnership that acts like a corporation but is taxed like a
partnership.
Advantages of partnerships include more financial resources, shared management,
and pooled knowledge, and longer survival. The disadvantages include unlimited liability,
division of profits, disagreements among partners, and difficulty of termination.

Section 5-3: Compare the advantages and disadvantages of corporations, and summarize
the differences between C corporations, S corporations, and limited liability companies.

A corporation is a state-chartered legal entity with authority to act and have

liability separate from its owners. Advantages include more money for investment,
limited liability, perpetual life, size, ease of ownership change, ease of drawing talented
employees, and separation of ownership from management. The disadvantages include
initial cost, paperwork, size, difficulty termination, double taxation, and possible conflict
with board of directors.
S corporations have the advantages of limited liability (like a corporation) and
simpler taxes (like a partnership). If you want to qualify for a S corporation status, a
company must have fewer than 100 stockholders (members of a family count as one
shareholder), its stockholders must be individuals or estates and U.S. citizens or
permanent residents, and the company cannot derive more than 25% of its income from
passive sources.
Limited liability companies have the advantage of limited lability without the
hassles forming a corporation or the limitations imposed by S corporations. Limited
liability companies may choose whether to be taxed as partnerships or corporations.
 Section 5-4: Define and give examples of three types of corporate mergers, and
explain the role of leveraged buyouts and taking a firm private.

A merger is the result of two firms forming one company. The three major types
are vertical mergers, horizontal mergers, and conglomerate mergers. Also, leveraged
buyouts are attempts by managers and employees to borrow money and purchase the
company. Individuals who, together or alone, buy all the stock for themselves are said to
take the company private.

Section 5-5: Outline the advantages and disadvantages of franchises, and discuss the
opportunities for diversity in franchising and the challenges of global franchising.

A franchise is an arrangement to buy the rights to use the business name and sell
its products or services in a given territory. A franchisee is a person who buys a franchise.
The benefits of a franchise include getting a nationally recognized assistance and
reputation, a proven management system, promotional assistance, and pride of
ownership. Drawbacks of a franchise includes high franchise fees, managerial regulation,
shared profits, and transfer of adverse effects if other franchises fail. Finally, the major
challenge when dealing with global franchises is that it is often difficult to transfer an
idea or product that worked well in the United States to another culture.

Section 5-6: Explain the role of cooperatives.

Cooperatives are organizations owned by customers or members. Some people for

cooperatives to acquire more economic power than they would have as individuals. Small
businesses often form cooperatives to gain more purchasing, marketing, or product
development strength.
Lynesse Pierre
Business Administration SIE
October: Outline/Summary
PART 2 Business Ownership: Starting a Small Business
Chapter 6: Entrepreneurship and Starting a Small Business

*after reading every chapter, the reader is supposed to be able to respond to

the following statements in the boxes. this also works out as an outline and summary*

Section 6-1: Explain why people take risks of entrepreneurships; list attributes of
successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home-
and web-based businesses.

The reason why people start their own businesses and take risks for
entrepreneurships is for and because of profit, independence, challenge, and opportunity.
Successful entrepreneurs are self-directed, action-oriented, highly energetic,
tolerant of uncertainty, and self-nurturing.
Intrapreneuring is the establishment of entrepreneurial centers within a larger firm
where people can innovate and develop new product ideas internally.
Finally, there has been an increase in home- and web-based businesses in the last few
years because the increase in power and decrease in price of computer technology have
leveled the field and made it possible for small businesses to compete against larger
companies- regardless of location.
 Section 6-2: Discuss the importance of small business to American economy
and summarize the major causes of small-business failure.

The Small Business Administration defines a small business as one that is

independently owned and operated and not dominant in its field of operation, and that
meets certain standards of size in terms of employees or sales (depending on the size of
others in the industry). Small businesses are important to the U.S. economy because small
business accounts for almost 50% of gross domestic product (GDP); perhaps soon, 80%
of U.S. workers first jobs are in small businesses. Many small businesses fail because of
managerial incompetence and inadequate financial planning.
Section 6-3: Summarize ways to learn about how small businesses operate.

The best way to learn about how small businesses operate is to learn from others.
Also, taking courses and talking to small business owners is a great way as well. Finally,
get some experience working for others, take over a successful firm, and study the latest
in small-business management techniques.

Section 6-4: Analyze what it takes to start and run a small business.

One main factor that is needed to start and run a small business is to have a
business plan. Also, funding is very important when wanting to start and run and small
business. A new entrepreneur has several sources and options of capital: personal savings,
family and business associates, banks and finance institution, angels and ventures
capitalists, government agencies, etc. Some problems a person may face small-business
owners may encounter is often having difficulty finding competent employees and
grooming employees for management responsibilities. If a person wants more help and
information in starting a small business, accountants, lawyers, marketing researchers,
loan officers, insurance agents, the SBA, SBICs, SBDCs, peer groups and even college
professors are resources to consider.

Section 6-5: Outline the advantages and disadvantages small businesses

have in entering global markets.

Foreign buyers rather invest in small businesses because small companies provide
a wider variety of suppliers and can ship products more quickly and small companies
give more personal service. The fact that financing is often difficult to find, many people
do not know how to get started and do not understand the cultural differences in foreign
markets, and the bureaucratic red tape is often overwhelming is why small businesses
have difficulty entering global markets and have disadvantages.