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lecture 2.ppt

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lecture 2.ppt

  1. 1. C H A P T E R 7 TYPES OF BUSINESS OWNERSHIP
  2. 2. TYPES OF BUSINESS • Entrepreneurs need to understand the advantages and disadvantages of various types of businesses so that they can choose the one that best suits their needs.
  3. 3. SOLE PROPRIETORSHIP • The easiest and most popular form of business ownership is the sole proprietorship. sole proprietorship a business that is owned and operated by one person
  4. 4. SOLE PROPRIETORSHIP • The owner of a sole proprietorship: receives the profits, incurs any losses, and is liable for the debts of the business.
  5. 5. SOLE PROPRIETORSHIP • In a sole proprietorship the owner must decide how much liability protection he or she needs. liability protection insurance against the debts and actions of a business
  6. 6. PARTNERSHIP • A partnership draws on the skills, knowledge, and financial resources of more than one person. partnership an unincorporated business with two or more owners who share the decisions, assets, liabilities, and profits
  7. 7. PARTNERSHIP General vs Limited The law requires that all partnerships have at least one general partner. A partnership may be set up so that all of the partners are general partners. general partner a participant in a partnership who has unlimited personal liability and takes full responsibility for managing the business
  8. 8. PARTNERSHIP • Some partnerships include a limited partner. limited partner a partner in a business whose liability is limited to his or her investment; a limited partner cannot be actively involved in managing the business
  9. 9. CORPORATIONS In a corporation, the owners of the business are protected from liability for the actions of the company. An important element of a corporation is limited liability, which means that its shareholders are not personally responsible for the company's debts. corporation a business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away
  10. 10. NON-PROFIT CORPORATIONS • A nonprofit corporation must fall within one of four categories: • religion • charity • public benefit • mutual benefit nonprofit corporation a legal entity that makes money for reasons other than the owner’s profit; it can make a profit, but the profit must remain within the company
  11. 11. LIMITED LIABILITY COMPANY • There are many benefits to forming a limited liability company (LLC). limited liability company (LLC) a company whose owners and managers have limited liability and some tax benefits, but which avoids some restrictions associated with Subchapter S corporations
  12. 12. LIMITED LIABILITY COMPANY • LLC is simpler to set up than a corporation • LLC allows for the flexibility of a partnership structure • LLC protects its owners with the limited liability of a corporation, its members are not liable for the company’s debts. • LLX is not subject to double taxation. Provides the pass- through tax advantages of partnership. Profits are taxed personally, and shareholders are taxed only once.
  13. 13. ASSESSMENT OF THE ENVIRONMENT (INTERNAL AND EXTERNAL)
  14. 14. THE MEANINING OF THE BUSINESS ENVIRONMENT The external environment is everything outside an organization that might affect it. An organization's external environment consists of two layers: The general environment - refers to those nonspecific dimensions and forces in an organization's surroundings that might affect its activities. It includes all PEST factors.The task environment - refers to those specific organizations or groups that are likely to influence an organization. It consists of competitors, customers, suppliers, regulators, unions and owners.
  15. 15. STANDARD TECHNIQUES • The following techniques are used to assess the internal and external environment: • 1. PEST / STEP Analysis - used to analyze the external environment • 2. SWOT Analysis - used to analyze both the internal and external environment • 3. Porter's Five Forces Model - used to analyze an industry in which an organization operates.
  16. 16. PEST ANALYSIS • What is PEST analysis • PEST analysis is an analysis model examining the external environment and the global factors that may affect a business. It can provide a quick understanding of the external pressures facing a business and their possible constraints on its strategy. It is usually divided into four external influences on a business – Political, Economic, Social and Technological.
  17. 17. PEST ANALYSIS • The Political/legal Environment. • The political/legal environment consists of the law and interpretation of laws that require firms to comply with .Ignorance or noncompliance with the laws, could result in fines. • Economic Environment . • The economic and competitive forces in the general environment influence business organizations and customers' decision and activities.
  18. 18. PEST ANALYSIS • Social/cultural Environment Analysis of the social environment is concerned with understanding the potential impacts of society and social changes on a business, its industry and markets. This may include changes in Tastes, fashion, lifestyle, preferences etc. • Technological Forces • The technological environment represents the application of knowledge based on discoveries in science, inventory and innovations. New technology results in new products and services for consumers, improved existing products and often lower prices through the development of more cost-efficient production and distribution methods. Technology affects the types of products that organizations can offer.
  19. 19. SWOT ANALYSIS • What is SWOT analysis? • SWOT analysis involves looking at the internal strengths and weaknesses of a business and external opportunities and threats. It is used to analyze the possible internal advantages and problems that a business has, and helps determine the external factors of the business which may affect its strategy. A SWOT analysis helps to conduct a quick analysis of a business’s current position so that it can help the business to develop or plan a direction of development or a proper strategy in future.
  20. 20. SWOT ANALYSIS MODELS
  21. 21. WHAT ARE PORTER'S FIVE FORCES? • Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis is frequently used to identify an industry's structure to determine corporate strategy. Porter's 5 forces are: 1.Competition in the industry 2.Potential of new entrants into the industry 3.Power of suppliers 4.Power of customers 5.Threat of substitute products

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