Name: Steven P Sanderson II

Date: 6/7/06
Class: Intro to Business BA11 5040
Professor: McNamara

Chapter 3
Questions on page 75

How do world population and market statistics support the expansion of U.S. business
into global markets?
With the world population around 6 billion plus or minus a few, that gives the U.S. quite
a few potential customers. Since we are able to practice free trade with many other
nations in the world we are able to sell products to other nations that cannot produce them
efficiently giving us the ability to price them at a premium to our cost of manufacturing
this gives us the ability to purchase things that we cannot produce readily which is a
factor in smooth cycles of business.

What is comparative advantage, and what are some examples of this concept in actual
global markets?
Comparative advantage theory states that a country should sell to other countries those
products that it produces most effectively and efficiently and buy from other countries
those products it cannot produce as effectively or efficiently. Some examples would be
that the U.S. is able to computer chips, software and engineering services, while at the
same time the U.S. does not have an advantage over various items like coffee beans or
making shoes.

How are a nation’s balance of trade and balance of payments determined?

First the definition of balance of trade would be the ratio of a nations exports vs. imports.
A favorable balance of trade would ultimately be to export more than you import. An
example of this would be to sell $200 worth of goods and buy $100 worth of goods
leaving you with $100 to spend somewhere else. An unfavorable balance of trade comes
when a country imports more than it exports such as the U.S. which has been in a trade
deficit for about 20 years.

What is dumping?
Dumping is defined as the practice of selling products in a foreign country at lower prices
than those charged in the producing county. Companies sometimes use this tactic to
reduce surplus products in foreign markets or to gain a foothold in a new market by
offering products for lower prices than domestic competitors do. Japan and Russia for
example have been accused of dumping steel in the U.S. And Canada of dumping
softwood lumber. U.S. laws against dumping are specific and require that foreign firms
must price their products to include 10 percent overhead costs and an 8 percent profit
margin. Now I believe it would be hard to prove some nations of dumping when they are
at a specific low cost advantage over the U.S. say in the area of wages.
Questions from page 81

What are the advantages to a firm of using licensing as a method of entry in global
markets? What are the disadvantages?
Some advantages of using licensing as an entry point into global markets would be that
someone else has to come up with the money, also the licensor usually will assist with
distribution, promotion and consulting which it normally charges a fee for. The licensor
also usually gets paid a royalty on the product or services sold. Some disadvantages
would be that typically a licensor would license the product or service for an extended
period of time, say 20 years, now if the licensor experiences tremendous growth the bulk
of the revenue will go to the licensor and not the licensee.

What services are usually provided by an export-trading company?

Some services usually provided by an export-trading company would be negotiations,
payment processing, dealing with foreign customs offices, documentation requirements
such as weights and measures. All of the aforementioned services are extremely
important to a company that does business abroad.

What is the key difference between a joint venture and a strategic alliance?
A joint venture is basically a partnership in which two or more companies often from
different countries join to undertake a major project. According to Coopers & Lybrand, a
New York-based international professional services firm, companies that participate in
such partnerships grow much faster than their counterpart companies that are not
participating. Joint venture can even be mandated by governments as a condition of
doing business in their country. The benefits of international joint ventures are clear:
Shared technology, shared marketing and management expertise, entry into market where
foreign companies are often not allowed unless their goods are produced locally, and
shared risk. A strategic alliance is a long-term partnership between tow or more
companies establish to help each company build competitive market advantages. Suck
alliances can provide access to market, capital and technical expertise. Unlike joint
ventures, however, the do not typically involve shares costs, risks, management or even
profits.

What is a multinational corporation? Can you name at least three multinational

corporations?
A multinational corporation is an organization that manufactures and market products in
many different countries; it has multinational stock ownership and multinational
management. Multinational companies are usually extremely large. Some multinationals
include; Exxon, Wal Mart, and Ford Motor Co.

Questions from page 92

What are the major hurdles to successful global trade?

Some major hurdles to successful global trade would be simply the differences in culture.
Within the culture there are differences in religion, manners and customs, values and
attitudes, language and personal communication. Not having a distinct understanding of
any of these aspects of culture could break a company when it is trying to penetrate a
foreign market. One example of this would be Coca-Cola offending the Muslins in Saudi
Arabia by putting the Saudi Arabian flag on their packaging. The flag’s design contains a
passage fro the Koran, and Muslims feel their holy writ should never be wrapped up
crumpled and thrown away.

What does ethnocentricity mean?

Ethnocentricity is when one culture has an attitude that its own culture is superior to
another’s. The U.S. is largely accused of being this way, where as for the most part
foreign companies adapt easily and effectively to American culture.

Which cultural and societal differences are most likely to affect global trade efforts?
(Name at least two)
Religion is a major cultural difference that may affect global trade. There are many
different religions in the world today and they are all different in the way that they are
performed ceremonially and what religious laws are contained in each one. Some
religions may not allow work on Sundays, some may not allow the eating of beef, which
would be particularly bad places for say a Burger King or McDonalds. Another
sociocultural difference that can also affect important business decisions involving
human resource management would be how authority is viewed upon by the working
crowd. Consider what happened to one American manager in Peru who was unaware of
this important cultural characteristic and believed workers should participate in
managerial functions. This manager was convinced he could motivate his workers to
higher levels of productivity by instituting a more democratic decision-making style than
the style already in place. Son workers began quitting their jobs in droves. When asked
why, the Peruvian workers said the new production manager and supervisors did not
know their jobs and were asking the workers what to do, the workers thought of the
managers as incompetent.

What are the advantages and disadvantages of trade protectionism and tariffs?
Trade protectionism is defined as the use of government regulations to limit the import of
goods and services. Advocates of protectionism believe it allows domestic producers to
survive and grow, producing more jobs. Countries use protectionist measures to guard
against things like dumping. Another form of protectionism would be import quotas
which are defined as limiting the amount of goods to be brought into the country. The
overall effect is to protect U.S. jobs and companies. Another form of protectionism
would be an embargo. An embargo would be the complete ban on the import or export of
a certain good or service to another country. This would be done in the case of high tech
weapons so they cannot be used against the U.S. Some disadvantages of tariffs would be
that for the country doing the exporting it may make it quite hard for the company to
grow.

Questions from page 94

What are the economic risks of doing business in countries like the People’s Republic of
China or Russia?
Some risks of doing business with countries such as China and Russia are that say in
China they have a one-party political system, its human rights policies usually leave
something to be desired and there is difficulty with China’s financial market. For quite
sometime China has been accused of currency manipulation by not letting it float ‘fairly’
like other countries do. With Russia sever political and cultural issues are still problems
for businesses.

What might be some important factors that will have an impact on global trading?
The largest factor that will have an impact on global trading is e-commerce. E-commerce
is by far the fastest growing segment of the market place as a whole today. Such
companies that come to mind would be E-Bay.com, Amazon.com; there has also been the
advent of comparison shopping sites, another form of e-commerce like Shopping.com
and Activeshopper.com.

Chapter 4

Questions from Page 110

When faced with ethical dilemmas, what questions can you ask yourself that might help
you make ethical decisions?
Three questions that you can ask yourself to help you make ethical decisions would be; Is
it legal? Is it balanced? and How will it make me feel about myself? When you ask
yourself is it legal not only should you wonder if you are violating any laws but are you
violating company policy. Really it comes down to should you drink and drive, how
should you fire an employee, how do you get rid of waste or even should you be using a
questionable nickname. When you ask yourself if the decision is balanced you should
ask yourself if you would like to be treated in this fashion. Often Win-Lose situations
become Lose-Lose situations and there is nothing like retaliation from the looser who has
suffered a major loss. Now when you ask yourself how you would feel about yourself
after the decision you should want to know if your family and the public in general would
be proud of you or ashamed of you. You would never want to have to ask yourself how
will I hide my actions so I look good this is an obvious indication that it is a bad decision.

What are the six steps to follow in establishing an effective ethics program in a business?
The six steps to follow are as follows:
Top management must adopt and unconditionally support an explicit corporate code of
conduct.
Employees must understand that expectations for ethical behavior begin at the top and
that senior management expects all employees to act accordingly.
Managers and others must be trained to consider the ethical implications of all business
decisions.
An ethics office must be set up. Pone lines to the office should be established so that
employees who don’t necessarily want to be seen with an ethics officer can inquire about
ethical matters anonymously. Whistleblowers (people who report illegal or unethical
behavior) must feel protected from retaliation. In 2002 President Bush signed the
Corporate and Criminal Fraud Accountability (Sarbanes-Oxley) Act. The act contains
historic protections for corporate whistleblowers.
Outsiders such as suppliers, subcontractors, distributors and customers must be told about
the ethics program. Pressure to put aside ethical considerations often comes from the
outside and it helps employees resist such pressure when everyone know what the ethical
standards are.
The ethics code must be enforced. It is important to back any ethics program with timely
action if any rules are broken.

Questions form page 118

What is corporate social responsibility and how does it relate to each of business’s major
stakeholders?
Corporate social responsibility is the concern businesses have for the welfare of society.
It goes well beyond merely being ethical. Just as you and I need to be good citizens,
contributing what we can to society, corporations need to be good citizens as well. The
social performance of a company has several dimensions:
Corporate philanthropy includes charitable donations to nonprofit groups of al kinds.
Corporate charitable donations amounted to $9.1 billion in 2001. Strategic philanthropy
involves companies making long-term commitments to one cause such as McDonald’s
founding and support of Ronald McDonald Houses, which house families whose
critically ill children require treatment away from home. Corporate responsibility
includes everything from hiring minority workers to making safe products, minimizing
pollution, using energy wisely and providing a safe work environment-that is, everything
that has to do with acting responsibly within society. Corporate policy refers to the
position a firm takes on social and political issues.

What is a social audit, and what kinds of activities does it monitor?

A social audit is a systematic evaluation of an organization’s progress toward
implementing programs that are socially responsible and responsive. One of the major
problems of conducting a social audit is establishing procedures for measuring a firm’s
activities and their effects on society. What should be measured? There is some question
as to whether positive actions should be added and negative actions subtracted. In
addition to social audits conducted by the companies themselves, there are four types of
groups that serve as watchdogs regarding how well companies enforce their ethical and
social responsibility policies. Socially conscious investors who insist that a company
extend its own high standards to its entire supplier organization. Environmentalists who
apply pressure by naming names of companies that don’t abide by the environmentalists’
standards. Union officials who hunt down violations and force companies to comply to
avoid negative publicity. Customers who take their business elsewhere if a company
demonstrated unethical of socially irresponsible practices.

Chapter 5

Questions from page 148

Most people who start businesses in the United States are sole proprietors. What are the
advantages and disadvantages of sole proprietors?
Some advantages of a sole proprietorship are as follows: Ease of starting and ending the
business. All you have to do to start a sole proprietorship is buying or lease the needed
equipment and put up some announcements saying you are in business. It is just as easy
to get out of business; you simply stop. There is no on to consult or to disagree with
about such decisions. Being you own boss. Working for others simply does not have eth
same excitement as working for yourself-at least, that’s the way sole proprietors feel
Pride of ownership. People who own and manage their own businesses are rightfully
proud of their work. They deserve all the credit for taking the risks and providing needed
goods or services. Leaving a legacy. Business owners have something to leave behind
for future generations. Retention of company profit. Other than the joy of being you
own boss, there is nothing life the pleasure of knowing that you can earn as much as
possible and not have to share that money with anyone else. No special taxes. All the
profits of a sole proprietorship are taxed as the personal income of the owner, and the
owner pays the normal income tax on that money. Some disadvantages of a sole
proprietorship are unlimited liability-the risk of personal loss. When you work for others,
it is their problem if the business is not profitable. When you own you own business you
and the business are considered one. Limited financial resources. Funds available to the
business are limited to the funds that the one owner can gather. Since there are serious
limits to how much money on person can raise, partnerships and corporations have a
greater probability of obtaining the needed financial backing to start a business and keep
it going. Management difficulties. All businesses need management; that is someone
must keep inventory, hire and fire and keep records in place. Overwhelming time
commitment. Though sole proprietors say they can set their own hours a great deal of
time is required to get a business up running and staying that way. They often work more
then their non business owning counterparts.

What are some of the advantages of partnerships over sole proprietorships?

Some advantages of partnerships of proprietorships are that there are usually more
financial resources available since there is more than one person in business. When two
or more people pool their money together it makes it easier to pay rent, insurance and
utilities. Shared management and pooled complementary skills and knowledge are
another benefit of a partnership. It could happen that two people get together and one
person is good with the front end for example sales and customer service while the other
partner is good at keeping records. Partnerships also on average experience a 400%
higher chance of lasting. There are also no special taxes with a partnership meaning that
all profits of partnerships are taxes as the personal income of the owners.

Why would unlimited liability be considered a major drawback to sole proprietorships

and general partnerships?
The answer to this is really quite simple. If the business defaults like the saying goes
“Somebody’s got to pay and it ain’t gonna be me” unfortunately for the one holding the
liability it is them. For the sole proprietors they are the ones left holding the bag if things
do not go right and the business defaults.
What is the difference between a limited partner and a general partner?
A general partner is an owner who has unlimited liability and is in assuming liability for
the businesses debts. A limited partner is an owner that can only loose his/her investment
and does not have any management responsibilities for the company.

Questions from page154

What are the major advantages and disadvantages of incorporating a business?

Some advantages of corporations are the liability is limited by the fact that corporations
are considered separate entities so the only thing you can loose is the money you invest.
There is also more money available for investment. To raise money, a corporation can
sell ownership (stock) to anyone who is interested. This means that millions of people
can own part of major companies like IBM, Xerox and Ford Motor Company. Say if you
sell 10 million shares at $50 a piece the company would be able to raise $500 million and
would have it available to build plants and to expand as necessary. Perpetual life is
another advantage to a corporation. It is also easy to transfer ownership of a corporation;
all you need to do is sell the stock certificate to another person. Some disadvantages of a
corporation are that there is often extensive paperwork to be done. Double taxation is
also another disadvantage to a corporation. Not only is the corporations income taxed but
so are the dividends paid to the investors. If an individual incorporates, he or she must
file both a corporate tax return and an individual tax return. The initial cost of
incorporating may also be high since it usually involves expensive lawyers and
accountants.

What is the role of stockholders in the role of a corporation?

The stockholders are the ones who are responsible for electing a board of directors other
than that they really do not have any other functions in the running of the corporation.

If you buy stock in a corporation and someone gets injured by one of the corporation’s
products, can you be sued? Why or why not? Could you be sued if you were a general
partner in a partnership?
Stockholders cannot be sued for something a corporation does or form any problems that
arise from something the corporation does or produces. The corporation is a separate
entity and the stockholders a shielded by their limited liability. The only thing a
stockholder may want to do is sell the stock or short it. Now if the same circumstances
come about over the form of a general partnership then yes you can be sued and I hope
you have a good lawyer. Since in a general partnership the partner is not shielded by
limited liability and therefore can loose everything.

Questions from page 166

What are some of the factors to consider before buying a franchise?

Some things that need to be considered before buying a franchise would be dose the
franchisor have an established reputation? Do they provide management and marketing
assistance? There are many other things to consider when looking into operating a
franchise. There could be coattail effects of a franchise which is when other franchises
fail, yours even if profitable could go out of business. There could also be a restriction on
selling the franchise, which makes quite a bit more difficult to leave the business then say
if you had a corporation, all you would have to do there is sell the stock certificate. Also
there can be a lot of management regulation. This means that you could almost really end
up working for the franchisor in a given respect. You may own the place but they are
telling you what to do.

What opportunities are available for starting a global franchise?

One opportunity that comes to mind for going global today would be e-commerce. This
right away opens up your doors to about 2 billion people that have internet access. Some
other opportunities may arise from a lack of availability of you service or product in a
certain area of the world.

What is a cooperative?
A cooperative is a business owned and controlled by the people who use it-producers,
consumers, or workers with similar needs who pool their resources for mutual gain.
There are 47,000 co-ops in America today. Some co-ops are set up to give individuals
more economic power as a group then they would have as an individual. The idea was
first for farmers who banded together to try and get better prices for their crops.
Eventually the organization expanded enough to allow them to be able to buy and sell
equipment, fertilizer and many other things needed in the running of a modern day farm.

Chapter 6

Questions from page 183

Why are people willing to take the risks of entrepreneurship?

People take the risk of entrepreneurship most notably because of the opportunities that
are available to them via this avenue. Also today the corporate workplace is not like it
used to be. Today in the corporate world you are as likely to get promoted a bonus or a
raise just as easily as you could get a pink slip. Today’s corporate world is not like it was
say 50 years ago when working hard for a company could get you to the upper realm of
the company. Some entrepreneurs are also out for the challenge of owning their own
business. For them there is more excitement in achievement than in power that they
might get from working for a large firm.

What are the advantages of entrepreneurial teams?

An entrepreneurial team is a group of experienced people from different areas of business
who join together to form a managerial team with the skills needed to develop, make, and
market a new product. A team may be better than an individual entrepreneur because
team members can combine creative skills with production and marketing skills right
from the start. Having a team also can ensure more cooperation and coordination among
functions.

How do micropreneurs differ from other entrepreneurs?

Micropreneurs are mostly people who run home based businesses; they rather live a
balanced lifestyle between work and home instead of trying to be the next 800 pound
gorilla. Many home-based businesses are people trying to balance home and a career.
One major thing that has changed the playing field and view of home based business is
computer technology. Broadband internet connections, fax machines and other
technologies have become so affordable now that the initial investment in a new company
has been substantially reduced.

What are some of the opportunities and risks of Web-based businesses?

With well over 1 billion people that have an internet connection this makes the idea of
owning a web based business very attractive. Web based businesses do not have a lot of
the same expenses that a traditional brick and mortar business incur. Many of the web
based businesses offer solutions that can be done online. There are many things that can
be done online and one of the largest things that can be done and are done by small
business are online retail shops through platforms like eBay.com Every year eBay.com
reports record growth in the amount of people who set up shop via their site. This is
proof that e-commerce is not only growing every year but growing in popularity. Also
today with record gasoline prices many people may find it practical to shop online so
they are not going from store to store. They can use comparison sites to find the lowest
prices on products and then purchase them from there.

Questions from page 193

A business plan is probably the most important document a small-business owner will
ever create. There are nine sections in the business plan outline on page 191. Can you
describe at least five of those sections?
The first part of a business plan would be the cover letter. In the cover letter you need to
make yourself standout since you will not be the only one looking for money. The best
way to address the cover letter is with the first name of the potential investor and with
“To whom it may concern” or “Dear Sir or Madam”. You will also need an executive
summary which will tell a little bit about the venture. You should include major goals
and a short description of the business. A potential investor will also want a company
background meaning give details of the company to date if there are any operations to
speak about and summarize the company’s financial situation. One of the most important
things an investor will want to know is who is going to be running the company and what
experience do they have. You will need to discuss this in the Management team part of
the business plan. Since investors are in business to make money like most businesses
are they are going to want to see a five year projection of income, expenses and funding
sources. This will help them decide on whether or not the company is worth investing in.
If the company has a great product and management team but shows that it will never
turn a profit no one in their right mind would invest in it. Now for one of the most
important things in the plan, the amount of capital needed. You must make sure that you
can explain how the money is going to be used and that the amount asked for and the
cash flows add up.

What are three of the reasons given by the SBA for why small businesses fail financially?
Some reasons as to why a small business will fail or do fail are as follows:
Plunging in without first testing the waters on a small scale. You may think that you have
a great product of service but if you do no test the market it may be like trying to sell Ice
to Eskimos. Another pitfall that can be averted by testing the marketplace would be over
or under pricing. If you overprice you product or service you may not be able to get the
amount of business you need to pay the bills. Also if you under price yourself you may
not be able to get enough business to pay the bills. Another large pitfall of why
businesses fail is bringing personal extravagance into the business. Trying to lead a
lifestyle the business was never meant to support.

Questions from page 198

Why do many small businesses avoid doing business overseas?

Small businesses avoid doing business overseas for a variety of reasons. One of the
largest reasons that small businesses avoid foreign business may because they do not
understand how those markets work or what they need to offer them. There is also a lot
of bureaucracy that must be worked through first before you can do anything overseas.
All of this may seem quite daunting to a small business that is just trying to get through
the first few years without failing.

What are some advantages small businesses have over large businesses in selling in
global markets?
Some things that small businesses have going for them over their larger counterparts in
the global markets are that they can adapt to markets a lot quicker than the larger
companies, this will help them in all aspects of their business such as personal customer
service and quicker turnaround on shipping or many other of the customers needs. Many
small companies will give their undivided attention to an overseas customer because they
are a major source of revenue for them.