Unformatted text preview: Some changes to
Primary Stakeholders for our class
Primary Stakeholders: – Owners (equity finance, stockholders, shareholders, investors all mean
the same thing)
– Employees (not appointed by the BOD see slide 13. Receive health
– Customers (B2B and B2C, always look from the perspective of the
company in the case)
– Suppliers (raw material inputs and debt capital. Don’t receive health
– Society (includes all levels of communities impacted by the business but
not covered above. Not used very often: environmental concerns,
potential Why aren’t corporate Officers considered employees?
Corporate Officers (appointed by the BOD) are expected to act like
the Owners and have a strong fiduciary responsibility.
Why is the Government not a primary stakeholder?
The government should not have a stake itself, but instead should
be serving in the best interest of the other primary stakeholder
groups (i.e. a jury trial).
groups General Introduction to Business
Information You Should Know
Please review the following slides on your
own and come with questions on
Thursday. Business Defined
Business: Profit-seeking enterprises or activities
that provide goods and services
→ Established to serve the needs of consumers
→ Owners seek to make profits
the Top line,
What customers pay you when they by goods or
services. Profit: Rewards for taking risk
– Net Income
The Bottom Line
What owners get to keep after subtracting all costs to
run the business.
run A business has to do well to do good
business Profit is NOT a dirty word! Without profit, businesses
Provide jobs for people.
Pay taxes to the
Do other socially
Survive in a very
economy. Basic Forms of Ownership
Basic Number Sales 72% 6% Partnership 8% 13% Corporation 20% 81% Sole Proprietorship Sole Proprietorships:
The simplest form of business
ADVANTAGES Easy to start
Simple tax rules:
business income =
personal DISADVANTAGES Unlimited liability:
responsible for all
– Financial support
– Human resources Limited growth
ADVANTAGES More resources
financial and talent
Can share the load
Longer survival (in
case of departure of a
No special taxes DISADVANTAGES Unlimited liability in some
forms of partnership
Division of profit
Exit conditions must be
spelled out in partnership
agreement Traditional Types of Partnerships
Limited: At least one
GP; rest are silent partners General: Each
partner manages firm. Passive
GP Each GP has unlimited
Investor Passive means
manage firm. Recap on Traditional Partnerships:
General vs. Limited
Limited partnerships are limited in both
liability of silent partners and their ability
to actively manage the firm.
At least one person in a limited
partnership must be on record as the
managing partner or general partner.
In general partnerships, each partner has
unlimited Corporate Form of Ownership
Origin of the term:
– From Latin corpus, which means
A legal entity with a life of its own,
apart from those who manage it
– Can sign contracts
– Can sue and be sued Articles of Incorporation filed with
state serves as “birth certificate” for
A single person can be a corporation,
does not need to be lots of owners.
What are the main advantages of incorporating a
→ Limited liability, and more money can be raised
What gives them limited liability?
→ The separation of ownership from control.
The Typical Corporate Structure The stockholders own the
company; majority rules. The
The Board of Directors govern
The officers manage the
company and make the dayto-day decisions (consider
them owner for stakeholder
analysis). Employees Corporations
ADVANTAGES Limited liability
Greater access to $
– Can sell shares of
ownership to others
ownership Separation of ownership
Ease of ownership
transfer DISADVANTAGES More costly to form
Must keep accurate
Potential for conflict with
Board of Directors
Taxed TWICE if
Separation of ownership
from 3 Basic Types
of Private or Closely Held: Not traded on any stock exchange; stock held by a few
exchange; Some are big: Hallmark, Bose, MasterCard and Mars Many are relatively small; a single individual can
incorporate and form a corporation.
incorporate Don’t have to share financials with outsiders Public: Shares traded on stock exchanges, widely held by many people and institutions
held Financial statements are open to the public
Financial Non-Profit: Performs public service, special tax considerations Private Enterprise System
What is another name for the Private Enterprise
→ Also known as capitalism
Also System that rewards companies for their ability to
recognize and meet the needs of consumers.
– Pure capitalism has very minimal laws
Managed or Democratic Capitalism is driven by competition, but the
government plays a significant role in making laws to protect
different Competition: Battle for customer acceptance
→ Industries with high product demand tend to have higher
→ Competition helps keep prices low but can result in lower
→ Adam Smith’s Invisible Hand
Invisible What other economic systems are
– 100% property owned by the collective government. Socialism
– Government owned and private owned industries
(50%/50% Democratic Socialism
– Heavy government involvement in the economy (30%
to 50% Government ownership).
to Key Facts
Key How many people are there in the United
States? – http://
www.census.gov/population/www/popclockus.html How many people are there in the World? – http://www.census.gov/ipc/www/popclockworld.html What is the largest country currently?
China = 1.3 billion
What will the largest country be in 2020?
India ~ 1.4 billion
Want to know more? Ask the CIA. – https://
www.cia.gov/cia/publications/factbook/index.html The Aging of America
40.0 Median Age 35.0
Source: Census Bureau 1920 1940 1960 1980 2000 % U.S. Population by Age
50% Under 15
0% Source: Census Bureau 1920 1940 1960 1980 2000 The Changing Business
But that is just the U.S.
We need a broader perspective.
The business world we live and compete in is
changing at a rapid pace.
The world we live in is getting smaller.
Recognize and embrace a broader world view
Differences in languages
Differences in culture, religion, attitudes
Differences in political, legal and ethical environments
Differences in economic environments
– Exchange rates, currency conversions
– Restrictions with respect to trade (tariffs, taxes, quotas) ...
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