Entrepreneurial activity 1 Essence of the market system

Entrepreneurial activity 1. Essence of the market system 2. Enterprise as modern form of ménage 3. Contractual relations and partnerships 4. International entrepreneurial activity

1. Essence of the market system Market is the system of economic relations between producers and users of products as the process of purchase and sale of commodities

The market system includes: 1. Production 2. Distribution 3. Exchange 4. Consumption

Market components: 1. Private property 2. Freedom of entrepreneurial activity 3. Competition

Functions of the market system 1. Informative 2. Intermediary 3. Price making 4. Regulative 5. Sanation

Market of tools of production Financial market Market of labor Types of markets: Market of services Commodity market Market of technologies

Functions and components of market infrastructure Functions 1. Organizational and law provision for relations between the subjects of ménage 2. Increase of efficiency of work of market participants 3. Realization of interests of market relations 4. Control of activity of participants of market relations

Components 1. Specialized kinds of market infrastructure 2. General infrastructure

2. Enterprise as modern form of ménage Economic activity is the activity of economic subjects in a sphere of public production, directed on making and realization of products, implementation of works or provision of services of cost character.

Entrepreneurship – it is independent, initiative, systematic, at an own risk economic activity, which is carried out by the subjects of manage with a purpose of reception of economic or social results.

The economic subjects are the participants of economic relations, which carry out economic activity, provide economic competence, have property and carry responsibility after their obligations within the limits of this property.

making of the new goods or new quality of that or other produce new market development Main directions of activity of entrepreneur realization of the reorganization invention of new source of raw material or half made products and introduction of new method of production

Freedom and capabilities Determination of basic directions of activity Qualities of entrepreneur Ability to Overcome resistance of social forces influence on others by the results of the activity

Subjects of menage 1. Economic organizations legal entities 2. Citizens of Ukraine, foreigners, persons without citizenship 3. Branches, representative offices, subsections

1. Creative 2. Resource 3. Organizational

1. Free choice of type of entrepreneurial activity 2. Independent forming of the program of activity 3. Free hire of workers 4. Commercial calculation and commercial risk 5. Free management of received income 6. Independent realization of foreign economic activity

Active Types of entrepreneurial activity Passive

Models of entrepreneurial activity Classic model oriented on the effective use of present resources Innovative model foresees the use of innovative, organizationally administrative, technical technological, socio economic decisions

FORMS OF ENTREPRENEURIAL ACTIVITY PRODUCTION BY CHARACTER: -basic -auxiliary - BY DIRECTIONS: - classic - innovative INTERMEDIARY Agenting: agents commissioners Consigns COMMERCIAL: Wholesale and retail sale Distributors Individual sale Auction trade commodity exchange currency exchange labor market

Entrepreneur Goods and services Profit (interest) Prestige aims Development of business

Components of entrepreneurial activity Aim: INITIATIVE eventual state or desired result which an enterprise tries to get Economic initiative is independent actions of personnel of enterprises, directed on the receipt of the planned result

— it is basic values, accepted an PRIORITy DESIRED RESULT enterprise in his activity on the period of motion to the purpose, which are expressed in the form of idea (for example, creation and production of new commodity) or tactic of conduct with the purpose of conquest of markets of sale. — receipt and accumulation of profit, support of production, increase of issue of products, upgrading, decline of prime price.

3 The three major forms of business ownership are (1) sole proprietorships, (2) partnerships, (3) corporations.

SOLE PROPRIETORSHIPS n ADVANTAGES OF SOLE PROPRIETORSHIPS n Sole proprietorships are the easiest kind of businesses for you to explore in your quest for an interesting career. Other advantages they mention may include the following: n

1. 2. 3. 4. 5. . Ease of starting and ending the business. Being your own boss. Pride of ownership. Retention of profit. No special taxes.

DISADVANTAGES OF SOLE PROPRIETORSHIPS 1. Unlimited liability 2. Limited financial resources 3. Difficulty in management 4. Overwhelming time commitment 5. Few fringe benefits 6. Limited growth. 7. Limited life span

PARTNERSHIPS A partnership is a legal form of business with two or more owners. The law defines the three key elements of any general partnership as n (1) common ownership, n (2) shared profits and losses, and n (3) the right to participate in managing the operations of the business. There are several types of partnerships: n (1) general partnerships, n (2) limited partnerships, and n (3) master limited partnerships.

A general partnership is a partnership in which all owners share in operating the business and in assum ing liability for the business's debts. n A new form of partnership, the master limited partnership (MLP), looks much like a corporation in that it acts like a corporation and is traded on the stock exchanges like a corporation, but it is taxed like a partnership and thus avoids the corporate income tax. n

n A limited partnership is a partnership with one or more general partners and one or more limited partners. A general partner is an owner (partner) who has unlimited liability and is active in managing the firm. A limited partner risks an investment in the firm, but enjoys limited liability and cannot legally help manage the company. Limited liability means that limited partners are not responsible for the debts of the business beyond the amount of their investment—their liability (debts they must pay) is limited to the amount they put into the company; their personal assets are not at risk.

ADVANTAGES OF PARTNERSHIPS There are many advantages to having one or more partners in a business. Often, it is much easier to own and manage a business with one or more part ners.

Partnerships usually have the following advantages: 1. More financial resources. 2. Shared management and pooled knowledge 3. Longer survival.

DISADVANTAGES OF PARTNERSHIPS Anytime two people must agree on anything, there is the possibility of conflict and tension. Partnerships have caused splits among families, friends, and marriages. 1. Unlimited liability. 2. Division of profits. 3. Disagreements among partners. 4. Difficult to terminate.

CORPORATIONS Although the word corporation makes people think of big businesses like General Motors, IBM, Ford, etc. , it is not necessary to be big in order to incorporate (start a corpo ration). Obviously, many corporations are big. However, incorporating may be beneficial for small businesses also.

A conventional (C) corporation is a state chartered legal entity with authority to act and have liability separate from its owners. What this means for the corporations owners (stockholders) is that they are not liable for the debts or any other problems of the corporation beyond the money they invest. Owners no longer have to worry about losing their house, car, or other property because of some business problem—a significant benefit. A corporation not only limits the liability of owners, it enables many people to share in the ownership (and profits) of a business without working there or having other commitments to it.

ADVANTAGES OF CORPORATIONS Most people are not willing to risk everything to go into business. 1. 1. More money for investment. 2. 2. Limited liability. 3. 3. Size. 4. 4. Perpetual life. 5. 5. Ease of ownership change. 6. 6. Ease of drawing talented employees. 7. 7. Separation of ownership from management.

DISADVANTAGES OF CORPORATIONS 1. Initial cost. 2. Paperwork 3. Two tax returns 4. Size 5. Difficulty of termination. 6. Double taxation. 7. Possible conflict with board of directors.

Individuals Can Incorporate A corporation does not need to have hundreds of employees or thousands of stockholders. Individuals (e. g. , doctors, lawyers, plumbers, and movie stars) can also incorporate. By doing so, they may save on taxes and receive other benefits of incorporation

LIMITED LIABILITY COMPANIES n LLCs offer the best of all corporate worlds for many new businesses: personal asset protection, choice to be taxed as partnership or as corpo ration (partnership level taxation was previously a benefit normally reserved for partners), and flexible ownership rules

CORPORATE EXPANSION: MERGERS AND ACQUISITIONS n What's the difference between mergers and acquisitions? A merger is the result of two firms forming one company. An acquisition is one company buying the property and obligations of another company.

There are three types of mergers: (a) horizontal merger—a merger of companies within the same line of business at the same stage of pro duction, (b) vertical merger—a merger of companies in different stages of production of the same product, and (c) conglomerate merger—a merger of firms in different lines of business.

Economic reasons justifying a merger include: (a) achievement of economies of scale and increases in market power, (b) acquisition of managerial and technical skills, (c) immediate possibility to exploit new technology or a new product, and (d) ability to take advantage of valuation differences (which depend upon the existence of market im perfections). Generally cited financial benefits to merging include: (a) diversification, (b) risk reduction and lower borrowing costs through coinsurance, and (c) ability to take advantage of unused debt capacity, tax losses, and unused tax shields. In some situations, diversification that reduces the cost of financial distress, along with the use of tax losses and shields, may increase the value of the firms in merger.

The minimum price that sellers of shares in a merger transaction should accept is the market value of the shares of stock of the corporation as if it had no merger prospects. n The maximum price a buyer would want to pay for shares in a merger would be the value of the shares as if the corporation had no merger prospects, plus the net present value of the merger benefits to the acquirer. n

FRANCHISES n Basically, a franchise agreement is an arrangement whereby someone with a good idea for a business (the franchisor) sells the rights to use the business name and to sell a product or service (the franchise) to others (the fran chisee) in a given territory. n

A franchise can be formed as a sole proprietorship, partnership, or corporation. n The most popular businesses for A franchise can be formed as a sole proprietorship, partnership, or corporation. franchising are restaurants (more than 80 percent of all franchises), retail stores, hotels and motels, and automotive parts and service centers. n n

ADVANTAGES OF FRANCHISES Franchising clearly has some advantages: n 1. Management and marketing assistance. n 2. Personal ownership. n 3. Nationally recognized name. n 4. Financial advice and assistance. n 5. Lower failure rate. n

DISADVANTAGES OF FRANCHISES 1. Large start up costs. n 2. Shared profit. n 3. Management regulation n 4. Coat tail effects. n 5. Restrictions on selling. n 6. Fraudulent franchisors. n

Voluntarily associations An association is a voluntarily association independent production enterprises, scientific, project, designer, build and other organizations. The participants of association appear independent legal entities and answer only after the obligations before partners. A corporation is a contractual association of subjects of manage on the basis of integration in them of scientific and technical, production and commercial interests, with the grant of separate plenary powers for the centralized adjusting by activity.

A business concern is a form of regulation associations of enterprises, which is characterized a property and control, an association takes place on principle of diversification. After creation of business concern the subjects of manage lose the independence. A consortium is a temporal association of enterprises for implementation of the scale economic program (created for the construction of roads, bridges, et cetera). A trust is combination in restraint of trade, which before belonged to the different enterprises, in the unique productive economic. complex. Enterprise loses the legal and economic independence fully.

A syndicate is this form of enterprise connected mainly with the sale of products and widespread mainly in extractive industries, rural and forest economy. Main task of syndicate — to organize the general sale of products. Holding is a joint-stock company which uses the capital for acquisition of controlling interests other companies with the purpose of establishment above them of control. Financially industrial groups are an aggregate of legal entities which united the assets with the purpose of realization of the scale investment programs. A production cooperative store is an association of persons for joint production and economic activity on the basis of the personal participation. Every founder must accept the direct labor participating in work of cooperative store. Distribution of income is conducted proportionally labor participation. Responsibility – general within the limits of a ration capital.

Economic society is an association of entrepreneurs for achievement of certain goals. Full society is an association of two and more businessmen (participants). Firm which created (by the association of capital conclusion of treaty) by them foresees realization of joint entrepreneurial activity and complete (unlimited) property responsibility.

Society on a faith (komanditne or mixed society) - unity, in which one or a few him actual members are carried complete (unlimited) responsibility after the obligations of society for property, that it is belonged to them, and other members-depositors carry responsibility, connected with activity of society, within the limits of stake of capital, that it is belonged to them in society, including unpaid by them part of the deposit.

Company with limited liability, — it production and other commercial organizations, created on the consent of legal entities and citizens the way of unity of their payments with the purpose of realization of economic activity receipt of profit. Such societies appear legal entities. The participants of LTD. carry property accountability within the limits of their payments.

A joint-stock company shows by itself the form of association of capital and capital goods due to an issue, placing and sale of actions. Difference between society, by the company limited liability, from one side, and by a joint-stock company — from other, folded mainly in that in first case people (businessmen) unite with the property for joint work, and in the second — a capital unites, above all things, for his general use. In that and the participants of association carry responsibility other case for the results of his activity, above all things, holdings.

n 3. Contractual relations and partner copulas Contractual relations A constituent agreement is a writing document, from the side of physical or legal persons, for creation of new organizational-juridical education for realization of concrete enterprise purpose.

Enterprise agreement stipulation in relation to realization of the chosen entrepreneurial activity in a certain legal form.

Partnerships Production co operation is realization of the reserved production cycle of the product prepared to the consumption by all partners together. Project financing – one of partners is obligated to finance realization of enterprise project of other partner.

Management by contract – place is taken through a transmission one businessman other «now how» of administrative character and provides investing of process. Inferior production – characterizes the form of the legally designed mutual relations between businessmen, in obedience to which one of them carries out the having a special purpose production of goods after pointing other.

Forward agreements – agreement mutual relations which need urgent practical realization are documentarily designed. Factoring – represent financial economic mutual relations between businessmen and factor by firms which for a certain reward undertake organization of receipt of account receivable from the side of other firms.

n Franchising is a transmission other firm of the money one firm for producing goods, grant of services, technology of conduct of business, for fixing and growth at the market of commodities and services.

4. International entrepreneurial activity Forms of internationalization n 1. a lower level is leasing, intermediary, consulting, marketing’s services n 2. a middle level is industrial, scientific and technical, production, sale, service activity. n 3. a high level is joint ventures n 4. the greatest level is forming of consortia, TNK

Purpose of international enterprise 1. stimulation of progressive structural changes of a n 2. creation of favorable terms for integration a n 3. defense of economic interests of a n 4. grant of identical possibilities n

A management shows by itself the centralized influence on the collective of people with the purpose of organization and co-ordination of their activity in the process of production. The main task of management is providing of growth of efficiency of production on the basis of permanent improvement of technical level, forms of I methods of management, increase of the labour productivity, as important terms of receipt and increase of profits of enterprise

Appear major principles of organization of management of operations: n 1) principle of having a special purpose compatibility and concentration. n 2) principle of continuity and reliability. n 3) principle of regularity, proportion and dynamism.

4) democratic principle of distributing of management functions. n 5) principle of scientific validity of management. n 6) principle of compatibility of the personal, collective and state interests. n 7) principle of management efficiency. n 8) principle of control and verification of implementation of the accepted decisions. n

Management functions n planning organization n motivation n control and account n

Copulas of control system n linear copulas n functional copulas n interfunctional copulas