1. Ch. 2 – Types of Businesses Sole Proprietorship (Advantages)  Owned by one person, which allows you to be your own boss and set your own hours.  All profits go to the owner  Easier and less expensive to start and run than other forms of business Sole Proprietorship (disadvantages)  Unlimited liability means the owner is responsible for any business losses  Startup costs may be high and money will have to come from the owner’s savings or a bank loan  Owner may not be familiar with all aspects of the business

2. Partnership (Advantages)  Sharing responsibilities and costs of running a business between two or more owners  One partner may be skilled in an area where the other is lacking, and vice versa Partnership (Disadvantages)  In a general partnership, all partners have unlimited liability for the debts of the business  Possibility of disagreements between partners because all decisions are shared

3. Corporation (Advantages)  Shareholders have limited liability and if the business fails they are not legally responsible for its debts  Shareholders may receive a dividend if the business is successful Corporation (Disadvantages)  Many people are involved in the decision-making process  Influence on company policies is equivalent to number of shares owned  Very expensive to start up

4.  Co-operative (Advantages) Members of the Co-operative make decisions about the business  Members have one vote, regardless of the number of shares owned  Profits are distributed according to how much each member spends at the Co-operative Co-operative (Disadvantages)  Many people are involved in the decision- making process, which could be problematic

5. Franchise (Advantages)  Easier to attract customers through brand recognition  Marketing costs are shared among all franchises  Receive corporate training and support Franchise (Disadvantages)  Franchise fees can be quite expensive  Franchise pays a monthly fee to the franchiser  All supplies must be purchased from the franchiser

6. E: Going into Business 1. Make money; be your own boss; independence and freedom to make your own hours; opportunity to be creative; opportunity to do something that you love and you are skilled in

7. 2. Service businesses generate a profit by doing something for other businesses or consumers, such as carpet cleaning or catering. Retail businesses, such as Sears and the Bay, but from a producer and sell to a consumer, which allows them to generate a profit. Manufacturing business produce products from raw materials or component parts and sell them to consumers or distributers. Car and appliance manufactures are examples of manufacturing business. Not-for-profit organizations, like the heart and stroke foundation, seek to meet the needs of the community rather than generating a profit

8. 3. Technology has improved to the point where home offices can run as efficiently as traditional offices. It has also spawned a new type of business: e-commerce. Many online businesses operate out of home offices because overhead costs are far lower, allowing for businesses that would otherwise be unable to operate a chance to enter the marketplace

9. 4. Consumers may be wary of online shopping because they don’t have the opportunity to physically touch the goods they are buying or to meet someone providing services. Others are worried about dishonest retailers. Consumers are wary of providing personal information over the web because identity theft is becoming more prevalent and they are concerned about the security of the private information

10. 5. Debt financing means borrowing money to run a business. Paying back the loan plus interest can be difficult for a new business. Equity financing means risking your saving or investor savings to run your business. This often means giving up part of the ownership of the business

11. 6. First you need to come up with an idea. Once you have an idea, you need to decide what type of business you want to start. They you need to research the market and evaluate the risk factors. You will then need to forecast the resources you require and how much financing is necessary to acquire them. Then you will need to secure either financing of debt financing through a bank loan

12. F: Risky Business 1. I should return the money to the customer. It is important to minimize the risk of the customer telling other potential customers that my work is unsatisfactory

13. 2. I need to quickly seek out another investor and determine whether it’s feasible to postpone the opening of the business for a short time until new financing is in place

14. 3. To minimize my financial risk, I need to discuss a possible payment plan with the customer. I should also prepare myself in case I don’t get the money. If all else fails, I could use a collection agency to get my money

15. 4. I need to discuss with Leigh the importance of making decisions as partners. Then we need to evaluate whether we need the equipment and if we can afford to keep it

16. 5. I need to sit down with the sales rep and have a discussion about my professional expectations of an employee. I need to document all activity and may need to let the sales rep go if this behavior continues. I also have to do something to appease the customer, starting with an apology and perhaps offering a discount on future business

17. G: International Business Structures  Joint venture: Definition: a business project that matches the skills of two individuals or businesses for mutual benefit Benefits: joint ventures are excellent opportunities to market products or services to a wider audience, as they allow a business to establish more contracts, get more leads, and increase its customer base Examples: Pacific Northern Gas Ltd. and Kitimat LNG Inc. are jointly building a natural gas pipeline in northern B.C.

18. International franchise: Definition: a way to achieve an international presence by authorizing a group or and individual to sell the parent company’s goods and services Benefits: the franchise can ride on the success of the franchiser Examples: Boston pizza, based in B.C. now operates franchises in the U.S.

19. Strategic alliance: Definition: an agreement between businesses to commit resources to achieve a common set of objectives. May be formed with customers suppliers, competitors, suppliers, competitors, or divisions of government. Each party remains separate and entirely independent Benefits: a strategic alliance can help businesses improve competitive positioning, gain entry to new markets, supplement critical skills, and share the risk or cost of major development projects Examples: CBC-radio Canada has developed alliances with other media such as the Toronto star, the national post, Maclean’s magazine, and la presse to jointly cover major stories such as health care and education

20. Merger: Definition: a process whereby two or more companies join together, either because one has purchased a controlling interest in the other(s) or because the companies have combined interests Benefits: a merger can help both companies strengthen their operations, enter new markets and acquire new technologies, resources and skills. Smaller companies may benefit from a merger because they may gain access to more capital or a larger sales force Examples: Molson, a Canadian brewery, merged with Adolph Coors, an American brewery

21. Offshoring Definition: the relocation of some of a company's operations to an other country Benefits: offshoring offers much lower skilled- labour costs, as well as proximity to large, emerging buyer markets Examples: IBM and Hewlett-Packard set up operations in India and China to take advantage of those countries’ relative high education levels but relatively low pay

22. Multinational Corporation Definition: a business operating in or involving several nations. Also known as a transnational Benefits: the global marketplace becomes the place for business for multinational corporations, and they can take advantage of what each country has to offer and potentially save money Example: Coca-Cola operates in many countries around the world

23. H: Strategic Alliances 1. Amazon/HMV HMV benefits by reaching a wider market for its products. Amazon benefits because it opens its business to a greater supply of goods. Customers shopping for music may also purchase other products MSN.ca/CTV News MSN.ca can offer quality news without expending the resources to write the story, thereby helping to position itself as a provider of current events. CTV news can attract a wider audience to its newscast

24. Visa/Wal-Mart Visa gets more people using its credit card as opposed to other credit cards. Wal-Mart benefits from increased spending because of the Visa card Scotiabank/Cineplex-Scene Program Scotiabank can attract a younger market in moviegoers and encourage people to use Scotiabank debit and visa cards to earn points for free movies. Cineplex gets brand loyalty and encourages people to see more movies

25. I: Detailed Design Drafting Services Ltd. 1. Subcontracting to China allows the company to substantially reduce its production costs, which increases its profitability. It also supports market demand for its services. A potential disadvantage may be negative consumer reaction if this strategy results in the loss of jobs in Canada

26. 2. e-commerce allowed the company to move from a small market in British- Columbia into a larger American market, which caused the business to grow substantially, both financially and in clientele

27. J: Review 1. A sole proprietorship is a business owned by one person 2. The biggest disadvantage of sole proprietorship is that the proprietor has unlimited liability and is fully responsible for all of the losses of the business 3. The sharing costs and responsibilities between two or more owners is considered a partnership 4. A partnership agreement outlines the terms or a partnership. In a general partnership, all partners have unlimited liability for the firm’s debts. In a limited partnership, on the other hand, each partner’s liability is limited to the amount of his or her investment

28. 5. With limited liability, owners’ responsibility for business debts is restricted to the amount invested 6. A unit of ownership in a corporation is called a share 7. A board of directors is but into place to manage the money of shareholders 8.Shareholders may receive a share of a company’s profits in the form of a dividend

29. 9. A corporation owned by a small number of owners is considered a private corporation, while a corporation with many shareholders is know as a public corporation 10. A business operated by the federal or provincial government is a crown corporation 11. A business owned by the workers or members who buy the goods or services of the business is a co-operative

30.  12. subway is an example of a franchiser the licenses the rights to use its name to another business, the franchisee  13. home-based business are sometimes referred to as SOHO  14. E-commerce allows shoppers to use the internet to buy goods at home  15. getting a bank loan to start your business is an example of debt financing business using investors money is an example of equity financing

31.  16. forecasting allows business to predict future conditions  17. subtracting costs and expenses from revenue determines whether a business has turned a profit or not  18. a joint venture combines the skills and expertise of two different businesses so that both benefit  19. the alliance between CBC and the Toronto star is an example of a strategic alliance

32.  20. a merger occurs when two or more companies join together to become a single organization  21. a Canadian company that moves it manufacturing to China is practicing offshoring  22. multinational corporations take advantage of the best resources of several countries