Chapter 2 Conducting Business in the United States Leonardo Matarrese @MyPlick
A Short History of Business in the United States—a summary, details on next slides <ul><li>The Factory System and the Indu...
The Factory System and the Industrial Revolution <ul><li>Major mid-eighteenth century change in production characterized b...
Laissez-Faire and the Entrepreneurial Era <ul><li>The principle that the government should not interfere in the economy bu...
The Production Era <ul><li>Period during the early twentieth century in which U.S. business focused primarily on improving...
The Marketing Era <ul><li>Idea that a business must focus on identifying and satisfying consumer wants in order to be prof...
The Global Era <ul><li>American consumers now drive cars made in Japan, wear sweaters made in Italy, and turn on CD player...
The Internet Era <ul><li>How does the growth of the Internet affect business?  </li></ul><ul><ul><li>The Internet will giv...
Types of Business Organizations Leonardo Matarrese @MyPlick Sole Proprietorship Partnership Corporation
Sole Proprietorship <ul><li>Business owned and usually operated by one person who is responsible for all of its debts </li...
Sole Proprietorship <ul><li>Advantages : </li></ul><ul><ul><li>Freedom </li></ul></ul><ul><ul><li>Privacy </li></ul></ul><...
Partnership <ul><li>General Partnership  </li></ul><ul><ul><li>Business with two or more owners who share in both the oper...
Partnership <ul><li>Advantages: </li></ul><ul><ul><li>New talent & money stimulate growth </li></ul></ul><ul><ul><li>Easie...
<ul><li>“ I look around, and for what we want out of it as individuals, we actually have the best deal going. You can’t ha...
Alternatives to General Partnership <ul><li>Limited Partnership </li></ul><ul><ul><li>Type of partnership consisting of li...
“ Partnership Liability” Claims of Creditors Leonardo Matarrese @MyPlick GENERAL PARTNERSHIP General Partner’s Personal As...
“ Partnership Liability” Claims of Creditors 1- 2- Leonardo Matarrese @MyPlick LIMITED PARTNERSHIP General Partner’s Perso...
Corporation <ul><li>Business that is legally considered an entity separate from its owners and is liable for its own debts...
Corporation <ul><li>Corporations may: </li></ul><ul><li>Sue & be sued </li></ul><ul><li>Buy, hold, & sell property </li></...
Corporation <ul><li>Advantages: </li></ul><ul><ul><li>Limited liability </li></ul></ul><ul><ul><li>Continuity </li></ul></...
Types of Corporations <ul><li>Closely Held (Private) Corporation </li></ul><ul><ul><li>Corporation whose stock is held by ...
Types of Corporations <ul><li>Limited Liability Corporation (LLC) </li></ul><ul><ul><li>Hybrid of a publicly held corporat...
Creating and Managing a Corporation <ul><li>Creating a Corporation </li></ul><ul><li>Corporate Governance </li></ul><ul><l...
Creating a Corporation <ul><li>Three basic steps:  </li></ul><ul><li>Consult an attorney  </li></ul><ul><li>Select a state...
Creating a Corporation <ul><li>Articles of Incorporation </li></ul><ul><ul><li>Document detailing the corporate governance...
Corporate Governance <ul><li>Corporate Governance </li></ul><ul><ul><li>Roles of shareholders, directors, and other manage...
Stock Ownership & Stockholders’ Rights <ul><li>Initial Public Offering ( IPO ) </li></ul><ul><ul><li>First offer of shares...
Boards of Directors <ul><li>Governing body of a corporation that reports to its shareholders and delegates power to run it...
“ Corporate Governance Hierarchy” Responsible for corporation’s overall performance Set major policies, report to sharehol...
Special Issues in Corporate Governance <ul><li>Strategic Alliance </li></ul><ul><ul><li>Strategy in which two or more orga...
Special Issues in Corporate Governance <ul><li>Employee Stock Ownership Plan (ESOP) </li></ul><ul><ul><li>Arrangement in w...
Special Issues in Corporate Governance <ul><li>Merger  </li></ul><ul><ul><li>The union of two corporations to form a new c...
Kinds of Mergers <ul><li>Horizontal Merger   </li></ul><ul><ul><li>Merger involving firms in the same industry </li></ul><...
Divestitures & Spin-Offs <ul><li>Divestiture </li></ul><ul><ul><li>Strategy whereby a firm sells one or more of its busine...
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Conducting a Business in the USA - Leonardo Matarrese

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  • Leonardo Matarrese @MyPlick
  • Leonardo Matarrese @MyPlick
  • Conducting a Business in the USA - Leonardo Matarrese

    1. 1. Chapter 2 Conducting Business in the United States Leonardo Matarrese @MyPlick
    2. 2. A Short History of Business in the United States—a summary, details on next slides <ul><li>The Factory System and the Industrial Revolution </li></ul><ul><li>Laissez-Faire and the Entrepreneurial Era </li></ul><ul><li>The Production Era </li></ul><ul><li>The Marketing Era </li></ul><ul><li>The Global Era </li></ul><ul><li>The Internet Era </li></ul>Leonardo Matarrese @MyPlick
    3. 3. The Factory System and the Industrial Revolution <ul><li>Major mid-eighteenth century change in production characterized by a shift to the factory system, mass production, and the specialization of labor </li></ul>Leonardo Matarrese @MyPlick
    4. 4. Laissez-Faire and the Entrepreneurial Era <ul><li>The principle that the government should not interfere in the economy but should instead let business function without regulation and according to its own “natural” laws </li></ul>Leonardo Matarrese @MyPlick
    5. 5. The Production Era <ul><li>Period during the early twentieth century in which U.S. business focused primarily on improving productivity and manufacturing efficiency </li></ul>Three Countervailing Powers  Business  Government  Labor Leonardo Matarrese @MyPlick
    6. 6. The Marketing Era <ul><li>Idea that a business must focus on identifying and satisfying consumer wants in order to be profitable </li></ul>Leonardo Matarrese @MyPlick
    7. 7. The Global Era <ul><li>American consumers now drive cars made in Japan, wear sweaters made in Italy, and turn on CD players made in Taiwan. Elsewhere around the world, people drive Fords, drink Pepsi, wear Levi’s jeans, use IBM computers, and watch Disney movies and television shows. </li></ul>Leonardo Matarrese @MyPlick
    8. 8. The Internet Era <ul><li>How does the growth of the Internet affect business? </li></ul><ul><ul><li>The Internet will give a dramatic boost to trade in all sectors of the economy, especially services. </li></ul></ul><ul><ul><li>The Internet will serve to level the playing field, at least to some extent, between larger and smaller enterprises regardless of what products or services they sell. </li></ul></ul><ul><ul><li>The Internet also holds considerable potential as an effective and efficient networking mechanism among businesses. </li></ul></ul>Leonardo Matarrese @MyPlick
    9. 9. Types of Business Organizations Leonardo Matarrese @MyPlick Sole Proprietorship Partnership Corporation
    10. 10. Sole Proprietorship <ul><li>Business owned and usually operated by one person who is responsible for all of its debts </li></ul>Leonardo Matarrese @MyPlick
    11. 11. Sole Proprietorship <ul><li>Advantages : </li></ul><ul><ul><li>Freedom </li></ul></ul><ul><ul><li>Privacy </li></ul></ul><ul><ul><li>Succeed or fail alone </li></ul></ul><ul><ul><li>Simple to form </li></ul></ul><ul><ul><li>Low start-up costs </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Unlimited liability </li></ul></ul><ul><li>Unlimited Liability </li></ul><ul><ul><li>Legal principle holding owners responsible for paying off all debts of a business </li></ul></ul><ul><ul><li>Dissolves when owner dies </li></ul></ul><ul><ul><li>Depends on resources of single individual </li></ul></ul>Leonardo Matarrese @MyPlick
    12. 12. Partnership <ul><li>General Partnership  </li></ul><ul><ul><li>Business with two or more owners who share in both the operation of the firm and in financial responsibility for its debts </li></ul></ul>Leonardo Matarrese @MyPlick
    13. 13. Partnership <ul><li>Advantages: </li></ul><ul><ul><li>New talent & money stimulate growth </li></ul></ul><ul><ul><li>Easier to borrow money </li></ul></ul><ul><ul><li>Resources of more than one individual </li></ul></ul><ul><ul><li>Relatively easy to form </li></ul></ul><ul><ul><li>Partners are taxed as individuals </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Partners share unlimited liability </li></ul></ul><ul><ul><li>Must file specific info about business & partners </li></ul></ul><ul><ul><li>Dissolves when partner leaves or dies </li></ul></ul><ul><ul><li>Difficult to transfer ownership </li></ul></ul><ul><ul><li>Internal conflict </li></ul></ul>Leonardo Matarrese @MyPlick
    14. 14. <ul><li>“ I look around, and for what we want out of it as individuals, we actually have the best deal going. You can’t have experience on a variety of projects when you’re by yourself.” </li></ul><ul><ul><li>~ Lowell Williams </li></ul></ul><ul><ul><li>Partner in Pentagram Design Inc . </li></ul></ul>Leonardo Matarrese @MyPlick
    15. 15. Alternatives to General Partnership <ul><li>Limited Partnership </li></ul><ul><ul><li>Type of partnership consisting of limited partners and an active or managing partner </li></ul></ul><ul><li>Limited Partner </li></ul><ul><ul><li>Partner who does not share in a firm’s management and is liable for its debts only to the limit of his or her investment </li></ul></ul><ul><li>General Partner </li></ul><ul><li>(Active Partner) </li></ul><ul><ul><li>Partner who actively manages a firm and who has unlimited liability for its debts </li></ul></ul>Leonardo Matarrese @MyPlick
    16. 16. “ Partnership Liability” Claims of Creditors Leonardo Matarrese @MyPlick GENERAL PARTNERSHIP General Partner’s Personal Assets General Partner’s Personal Assets Partnership’s Assets
    17. 17. “ Partnership Liability” Claims of Creditors 1- 2- Leonardo Matarrese @MyPlick LIMITED PARTNERSHIP General Partner’s Personal Assets Partnership’s Assets Limited Partner’s Personal Assets
    18. 18. Corporation <ul><li>Business that is legally considered an entity separate from its owners and is liable for its own debts; owners’ liability extends to the limits of their investments </li></ul>Leonardo Matarrese @MyPlick
    19. 19. Corporation <ul><li>Corporations may: </li></ul><ul><li>Sue & be sued </li></ul><ul><li>Buy, hold, & sell property </li></ul><ul><li>Make & sell products to customers </li></ul><ul><li>Commit crimes & be tried & punished for them </li></ul>Leonardo Matarrese @MyPlick
    20. 20. Corporation <ul><li>Advantages: </li></ul><ul><ul><li>Limited liability </li></ul></ul><ul><ul><li>Continuity </li></ul></ul><ul><ul><li>Easy to transfer ownership </li></ul></ul><ul><ul><li>Easy to raise money </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Tender offer </li></ul></ul><ul><ul><li>High start-up costs </li></ul></ul><ul><ul><li>Charter required </li></ul></ul><ul><ul><li>Double-taxation </li></ul></ul>Leonardo Matarrese @MyPlick
    21. 21. Types of Corporations <ul><li>Closely Held (Private) Corporation </li></ul><ul><ul><li>Corporation whose stock is held by only a few people and is not available for sale to the general public </li></ul></ul><ul><li>Publicly Held (Public) Corporation </li></ul><ul><ul><li>Corporation whose stock is widely held and available for sale to the general public </li></ul></ul><ul><li>S Corporation </li></ul><ul><ul><li>Hybrid of a closely held corporation and a partnership; organized and operated like a corporation, but treated as a partnership for tax purposes </li></ul></ul>Leonardo Matarrese @MyPlick
    22. 22. Types of Corporations <ul><li>Limited Liability Corporation (LLC) </li></ul><ul><ul><li>Hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability </li></ul></ul><ul><li>Professional Corporation </li></ul><ul><ul><li>Form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability </li></ul></ul><ul><li>Multinational or Transnational Corporation </li></ul><ul><ul><li>Form of corporation spanning national boundaries </li></ul></ul>Leonardo Matarrese @MyPlick
    23. 23. Creating and Managing a Corporation <ul><li>Creating a Corporation </li></ul><ul><li>Corporate Governance </li></ul><ul><li>Special Issues in Corporate Ownership </li></ul>Leonardo Matarrese @MyPlick
    24. 24. Creating a Corporation <ul><li>Three basic steps: </li></ul><ul><li>Consult an attorney </li></ul><ul><li>Select a state in which to incorporate. </li></ul><ul><li>File articles of incorporation and corporate bylaws </li></ul>Leonardo Matarrese @MyPlick
    25. 25. Creating a Corporation <ul><li>Articles of Incorporation </li></ul><ul><ul><li>Document detailing the corporate governance of a company, including its name and address, its purpose, and the amount of stock it intends to issue </li></ul></ul><ul><li>Bylaws </li></ul><ul><ul><li>Document detailing corporate rules and regulations, including election and responsibilities of directors and procedures for issuing new stock </li></ul></ul>Leonardo Matarrese @MyPlick
    26. 26. Corporate Governance <ul><li>Corporate Governance </li></ul><ul><ul><li>Roles of shareholders, directors, and other managers in corporate decision making </li></ul></ul><ul><li>Stockholder (or Shareholder) </li></ul><ul><ul><li>Owner of shares of stock in a corporation </li></ul></ul><ul><li>Stock </li></ul><ul><ul><li>Share of ownership in a corporation </li></ul></ul>Leonardo Matarrese @MyPlick
    27. 27. Stock Ownership & Stockholders’ Rights <ul><li>Initial Public Offering ( IPO ) </li></ul><ul><ul><li>First offer of shares in a closely held corporation to outside investors </li></ul></ul><ul><li>Preferred Stock </li></ul><ul><ul><li>Guarantees holders fixed dividends and priority claims over assets but no corporate voting rights </li></ul></ul><ul><li>Common Stock </li></ul><ul><ul><li>Pays dividends and guarantees corporate voting rights, but offers last claims over assets </li></ul></ul><ul><li>Proxy </li></ul><ul><ul><li>Authorization granted by a shareholder for someone else to vote his or her shares </li></ul></ul>Leonardo Matarrese @MyPlick
    28. 28. Boards of Directors <ul><li>Governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations, but remains responsible for sustaining its assets </li></ul><ul><ul><ul><li>Inside Directors – top managers with primary responsibility for the organization </li></ul></ul></ul><ul><ul><ul><li>Outside Directors – attorney’s accountants, university officials, & executives from other firms </li></ul></ul></ul><ul><li>Chief Executive Officer (CEO) </li></ul><ul><ul><li>Top manager hired by the board of directors to run a corporation </li></ul></ul>Leonardo Matarrese @MyPlick
    29. 29. “ Corporate Governance Hierarchy” Responsible for corporation’s overall performance Set major policies, report to shareholders, legally responsible for corporate actions Purchase ownership shares, and own the corporation 1- 2- Leonardo Matarrese @MyPlick Officers Board of Directors Stockholders
    30. 30. Special Issues in Corporate Governance <ul><li>Strategic Alliance </li></ul><ul><ul><li>Strategy in which two or more organizations collaborate on a project for mutual gain </li></ul></ul><ul><li>Joint Venture </li></ul><ul><ul><li>Strategic alliance in which the collaboration involves joint ownership of new venture </li></ul></ul>Leonardo Matarrese @MyPlick
    31. 31. Special Issues in Corporate Governance <ul><li>Employee Stock Ownership Plan (ESOP) </li></ul><ul><ul><li>Arrangement in which a corporation holds its own stock in trust for its employees, who gradually receive ownership of the stock and control its voting rights </li></ul></ul><ul><li>Institutional Investors </li></ul><ul><ul><li>Large investors, such as mutual funds and pension funds, that purchase large blocks of corporate stock </li></ul></ul>Leonardo Matarrese @MyPlick
    32. 32. Special Issues in Corporate Governance <ul><li>Merger  </li></ul><ul><ul><li>The union of two corporations to form a new corporation </li></ul></ul><ul><li>Acquisition </li></ul><ul><ul><li>The purchase of one company by another </li></ul></ul>Leonardo Matarrese @MyPlick
    33. 33. Kinds of Mergers <ul><li>Horizontal Merger   </li></ul><ul><ul><li>Merger involving firms in the same industry </li></ul></ul><ul><li>Vertical Merger  </li></ul><ul><ul><li>Merger between firms that are customers and/or suppliers to one another </li></ul></ul><ul><li>Conglomerate Merger  </li></ul><ul><ul><li>Merger between firms in unrelated businesses </li></ul></ul><ul><li>Takeover Tactics </li></ul><ul><ul><li>A takeover is considered friendly when the acquired company welcomes the merger </li></ul></ul>Leonardo Matarrese @MyPlick
    34. 34. Divestitures & Spin-Offs <ul><li>Divestiture </li></ul><ul><ul><li>Strategy whereby a firm sells one or more of its business units </li></ul></ul><ul><li>Spin-Off </li></ul><ul><ul><li>Strategy of setting up one or more corporate units as new, independent corporations </li></ul></ul>Leonardo Matarrese @MyPlick

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