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MGT Chapter 4-6


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[Front]


List the 7 government activities that affect business
[Back]


- Crown Corporations - Laws and Regulations - The Bank of Canada - Taxation and Financial Policies - Government Expenditures - Purchasing Policies - Services

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List the 7 government activities that affect business
- Crown Corporations - Laws and Regulations - The Bank of Canada - Taxation and Financial Policies - Government Expenditures - Purchasing Policies - Services
Define Crown Corporation
Companies that are owned by the federal or provincial government.
Crown Corporations are set up to
1. Provide services that were not being provided by business. E.g. Air Canada in 1930s 2. Bail out major industries in trouble. E.g. Canadian National Railroad (CNR) in 1919 3. Provide special services not otherwise available; e.g., Bank of Canada
Define Privatization
The process of governments selling Crown corporations
Define Deregulation
Government withdrawal of certain laws and regulations that seem to hinder competition. Therefore the marketplace becomes more competitive
Define Marketing boards
- organizations that control the supply or pricing of certain agricultural products. E.g. milk production - Marketing boards promote stability in volatile areas of the economy, e.g., farming
What is the Bank of Canada(BoC) and what does it do ?
The Bank of Canada (BoC), a federal Crown corporation, is Canada’s central bank. As a financial institution, it provides banking services on behalf of the federal government; however, it does not offer banking services to the public
Define Monetary Policy
Is the management of the money supply and interest rates
Define Money Supply
The money supply is the amount of money the BoC makes available for people to buy goods and services.
Interest Rates
Reduce interest rates to stimulate the economy and increase interest rates slow down the economy to control inflation
The role of taxes
Taxes (revenue, income, and property) are used by government to pay for services, pay down debt, and fund government operations and programs
Role of sin taxes
Sin taxes are used to discourage tax payers from using certain products; e.g., cigarettes.
Role of tax credits
Tax credits are given to companies to encourage growth
Define Fiscal Policy
The federal government’s effort to keep the economy stable by increasing or decreasing taxes or government spending
Define Deficit
Occurs when the government spends over and above the amount it gathers in taxes over a specific period of time (namely a fiscal year).
Define National Debt
The accumulation of government surpluses and deficits over time.
Define Surplus
An excess of revenues over expenditures.
Define Federal Budget
- a comprehensive report that reveals government financial policies and priorities for the coming year.
What does a Federal Budget do ?
- shows how much revenue the government expects to collect - any changes in income and other taxes and whether a deficit or surplus is expected
Monetary Policy
- management of the money supply and the interest rates - Controlled by BoC and it raises and lower interest rates in attempt to control the business cycles
Public-Private Partnership (P3s)
Merging of public and private philosophies
The Competition Bureau
According to competition law, a store must offer regular pricing for a substantial period of time, usually 50% when it comes to low price.
Federal government responsibilities include
- Trade regulations / - Immigration - Incorporation of federal companies / -Criminal law - Taxation (direct & indirect) / -Fisheries - Banking and $ system - DnD - Hospital insurance - Public debt and property - Unemployment
Provincial government responsibilities include
•natural resources within their boundaries •direct taxation for provincial purposes •incorporation of provincial companies •licensing for revenue purposes •the administration of justice •health and social services •municipal affairs•property law•labour law •education •regulation of provincial trade and commerce
Municipal government responsibilities include
- consumer protection - zoning requirements - business regulations, licensing - taxation - essential and other services
Industrial Policy
A comprehensive, coordinated government plan to guide and revitalize the economy
The strategic approach
Managements primary orientation to the economic interests of shareholders. Adam Smiths notion says that the maximum gain is realized when, managers attend only to their shareholder’s interests.
Pluralist Approach
Special responsibility of management to optimize profits, bit not at the expense of the employees, suppliers, and members od the community
Responsibility to Customers
Consumers have 4 basic rights - Safety - Be informed - To choose - Be heard Responsibility to society Create new wealth. Social justice Responsibility to the environment
Ethics
Reflect peoples proper relations with one another how people should treat others
Compliance Based Ethics Code
Emphasize preventing unlawful behaviours by increasing control and penalizing wrongdoers. Avoiding legal punishment
Integrity Based Ethics Codes
Create an environment that supports ethically sounds behaviour. Shared accountability among employees.
Corporate social responsibility
The concern businesses have for the welfare of society, not just for their owners
Corporate Responsibility
Includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment
Whistleblowers:
People who report illegal or unethical behavior.
Social audit:
A systematic evaluation of an organization’s progress toward implementing programs that are socially responsible and responsive
Triple-bottom line (TBL, 3BL, or People, Planet, Profit):
A framework for measuring and reporting corporate performance against economic, social, and environmental parameters.
Fair Trade:
Social movement dedicated to making sure that producers in developing countries are paid a fair price for the goods we consume, resulting in more money in their pockets
Sole Proprietorship:
A business that is owned, and usually managed, by one person
Partnership
A legal form of business with two or more parties.
Corporation:
A legal entity with authority to act and have liability separate from its owners
Advantages to Sole Proprietorship
•Ease of starting and ending •Be your own boss •Pride of ownership •Retain profit •No special taxes – profits taxed as personal income •Less regulation
Disadvantages to Sole Proprietorship
•Unlimited liability •Limited financial resources •Difficulty recruiting for needed skills •Overwhelming time commitment •Few fringe benefits •Limited growth •Limited lifespan •Possibly pay higher taxes
General Partnership
A partnership in which all owners share in operating the business and in assuming liability for the business’s debts
Limited Partnership
A partnership with one or more general partners and one or more limited partners.
Partnership Advantages
•More financial resources •Shared management and pooled, complementary skills and knowledge •Longer survival •Shared risk •No special taxes •Less regulations than a corporation
Partnership Disadvantages
•Unlimited liability •Division of profits •Disagreements among partners •Difficulty of termination •Possibility of higher taxes
Corporation
A federally or provincially chartered legal entity with authority to act and have liability separate from its owners (stockholders/shareholders) .
Private corporation:
Is usually controlled by a small number of shareholders and it shares are not listed on a stock exchange
Public corporation:
Has the right to issue shares to the public, so its shares may be listed on a stock exchange
Corporation Advantages
•Limited liability •Public Corporation: More money for investment •Size: may be larger due to increased resources •Perpetual life•Ease of ownership change •Ease of attracting talented employees •Separation of ownership from management
Corporation Disadvantages
•High initial costs •Extensive paperwork •Double taxation •Two tax returns •Size: may become too inflexible to new ideas •Termination difficult •Stockholder and board conflict
Articles of incorporation:
A legal authorization from the federal or provincial/territorial government for a company to use the corporate format
Franchise agreement:
An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell its goods and services in a given territory.
Franchisor:
A company that develops a product concept and sells others the rights to make and sell the products.
Franchise
The right to use a specific business’s name and sell its goods and services in a given territory
Franchisee:
A person who buys a franchise
Franchises Advantages
•Management and marketing assistance •Personal ownership •Nationally recognized name •Financial advice and assistance •Lower failure rate
Franchises Disadvantages
•Large start-up costs •Shared profit •Management regulation •Coattail effects •Restrictions on selling •Fraudulent franchisors
Co-operative:
An organization owned by people-producers, consumers, or workers-with similar needs who pool their resources for mutual gain, e.g, credit unions
How do Co- operatives work
Purpose: meets the common needs of their members Control Structure: one member/one vote system Allocation of Profit: profits are shared among their member-owners on the basis of how much they use the organization, not on how many shares they hold
Entrepreneurship
Accepting the challenge of starting and running a business
Famous Canadian Entrepreneurs
•Wallace and Harrison McCain (McCain Foods Limited) •Billes brothers (Canadian Tire) •Ablan Leon (Leon’s Furniture) •J. W. Sobey (Sobey's) •Christine Magee (Sleep Country Canada)
Reasons to become Entrepreneur
1.New idea, process, or product 2.Independence 3.Challenge 4.Family pattern 5.Profit 6.Lack of opportunities in other areas
What does it take to become an entrepreneur
1.Self-directed 2.Action-oriented 3.Self-confident 4.Highly energetic 5.Tolerant of uncertainty 6.Able to learn quickly
Turning Your Passions and Problems into Opportunities
•A business idea is a good business opportunity if: 1.It fills customers’ needs. 2.You have the skills and resources to start a business. 3.You can sell the product or service at a price customers are willing and able to pay-and still make a profit. 4.You can get your product or service to customers before your window of opportunity closes or before competitors with similar solutions beat you to the marketplace. 5.You can keep the business going.
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. •Combines creative skills with production and marketing skills right from the start. •Can ensure more co-operation and coordination among functions.
Micro-enterprise:
A small business defined as having one to four employees.
Micropreneurs:
Small-business owners with fewer than five employees, who are willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle. •Many micropreneurs are owners of home-based businesses.
Reasons for Growth in Home-Based Businesses
•Computer technology•Corporate downsizing•Change in social attitudes •Challenges include: getting new customers, managing time, keeping work and family tasks separate, abiding by city ordinances
Potential Home-Based Businesses
1.Home Renovation Services 2.Pet Products and Services 3.Catering Services 4.Cleaning Services 5.Fall Prevention Products - Sales and Service 6.Wedding Planner Services 7.Ecommerce 8.In-Home Beauty Services 9.Sewing and Alteration Services10.Business/Life Coach Services
Intrapreneurs are:
Creative people who work as entrepreneurs within corporations. •The idea is to use the company’s existing resources-human, financial, and physical–to launch new products and generate new profits.
Business incubators:
Centres that provide space, services, advice, and support to assist new and growing businesses to become established and successful.
Goals of incubators are:
- Produce successful companies - Create jobs - Retain businesses in a community - Building or accelerating growth in a local industry - Diversifying local economies
Small business is:
A business that is independently owned and operated, is not dominant in its field, and meets certain standards of size in terms of employees or annual revenues. •Small businesses are often able to provide better customer service and respond to customer needs faster than larger organizations.
Getting Started in Small Business
A business establishment must meet the following criteria: it must have one paid employee, it must have annual sales revenue of $30,000, and it must be incorporated and have filed a federal corporate income tax return at least once in the previous three years.
Learning About Small-Business Operations
There are several ways to get into your first business venture: 1.Learn from others. 2.Get some experience. 3.Buy an existing business. 4.Buy a franchise. 5.Inherit/ take over a family business
Managing a Small Business
To be successful as a small business owner, the following functions are important to explore: 1.Planning your business (business plan). 2.Financing your business (finance) = Venture Capitalists or Crowd funding 3.Knowing your customers (marketing). 4.Managing your employees (human resource development). 5.Keeping records (accounting).
Sample of Outline of Business Plan
•Cover Letter •Executive Summary •Company Background •Management Team •Financial Plan •Capital Required •Marketing Plan •Location Analysis•Manufacturing Plan•Appendix
Going Global: Disadvantages
•Major challenges: - difficulty obtaining financing. - may not know how to get started. - may not understand cultural differences in prospective markets. - may be too much bureaucratic paperwork for a small business to manage.
Going Global: Advantages
•Overseas buyers enjoy dealing with individuals rather than large corporations. •SME’s can usually begin shipping faster. •They can often provide more personal service and personal attention, because overseas accounts may be their major source of business.