Unit 1: intro to business management

Stakeholders

a person, group, or organisation that can affect or be affected by an organisations actions, objectives and policies and therefore have an interest or stake in the actions of the business

Stakeholder concept

priority to stakeholders rather than shareholders

Internal stakeholders

* employees (pay, conditions, job security)
* shareholders (profit, vision, liquidity, efficiency)
* managers (financial performance, customer perception, profits, sales targets)

External Stakeholders

* suppliers (speed of payment, level and regularity of orders, fairness of treatment)
* customers (value, service, quality, ethical considerations)
* government (taxation, compliance with legislation such as health and safety, jobs created)
* banks and other creditors (liquidity, gearing)
* special interest groups (pressure groups)
* competitors

pressure groups

a group that tries to influence public policy in the interest of a particular cause

Stakeholder conflict

* not possible to satisfy all stakeholders all the time
* conflict will always arise from new developments, business activities

Stakeholder mapping

Allows managers to assess how to deal with conflicting stakeholder objectives

Group A

minimal effort

Group B

keep informed

Group C

keep satisfied. this is a must as they have the power to influence other groups

Group D

Key players (maximum effort)

STEEPLE analysis

Social, Technological, Economic, Ecological, Political, Legal, Ethical

strategic planning tool used to focus on the opportunities and threats of the external environment that affects a business

competitive advantage

the ability of an organization to produce goods or services more effectively than competitors do

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

Purchasing economies of scale

Buying resources in bulk to get a discount from suppliers

Technical economies of scale

Reductions in unit costs arising from the effective use of technology

Financial economies of scale

A situation where large firms are able to borrow money on better terms than smaller firms

Marketing economies of scale

marketing costs can be spread over a higher level of sales

Managerial economies of scale

Larger businesses can afford to hire specialist functional managers

diseconomies of scale

related to management problems of trying to control and direct an organisation with many thousands of workers

communication problems

large scale operations will often lead to poor feedback to workers. can lead to poor decision making due to inadequate or delayed information and management inefficiency

small buisness definition

less than 100 employees in US, 50 in Europe

Internal growth

expansion from within a business by expanding the range of products and/or locations and/or factories

External growth

When a business takes over or merges with another business

Merger

the combination of 2 similarly sized companies combined to form a new company

Takeover

when another company buys over 50% of the shares of a company and becomes controlling owner

aquisition

When a company purchases another company and takes over

Horizontal integration

acquiring a rival company in the same industry

Vertical Integration

the need to control the supply chain process either forward (towards the customer) or backwards (to monitor and secure raw material supplies)

conglomerate

Merger or takeover of a business in a different industry or market

joint venture

2 or more businesses agree to work closely together on a particular project and create a separate business division to do so

strategic alliance

a partnership formed to create competitive advantage on a worldwide basis

Franchising

a business that uses the name, logo, and trading system of an existing successful business

Globalization

the growing integration and interdependence of the world’s economies causing customers around the globe to have increasingly similar habits and tastes

multinational corporation

a company that operates, owns and controls resources outside of its country of origin

what is a business

* an entity which tries to combine human, physical and financial resources into processing goods and services to respond to and satisfy customer needs

the production process inputs - capital

* amount of money needed to run a business
* man-made goods like machines, buildings, vehicles and equipment needed for a business to operate
* investment - increasing spending on capital

the production process inputs - land

* space where business is operated
* raw materials and natural resources that are used in making a product

the production process inputs - labour and manpower

* physical and mental efforts of people to produce products/services

the production process inputs - enterprise/entrepreneurship

* management, organisation, and planning of other three factors of production
* actions of entrepreneur who shows initiative and takes risks to set up, invest and run a business

the production process outputs - products and services

* goods are physical products like, cars, computers, books and food
* services are intangible products like haircuts, bus rides, education and health care

business functions

* human resources
* finance and accounts
* marketing
* operations

primary sector

extracts raw materials

secondary sector

manufactures goods

tertiary sector

the service industry

quaternary sector

provides information services (IT)

reasons for starting a business

* pursuing a passion
* opportunity
* a good idea
* income potential
* new lifestyle
* autonomy/own boss
* challenge
* creativity

steps in starting up a business

* identifying market opportunities
* sourcing capital (finance)
* determining a location
* building a customer base

reasons why new businesses fail

* not investigating the market (market research)
* business plan problems
* too little financing
* bad location, internet pressure and marketing
* rigidity (not adapting to change)
* expanding too fast

problems faced by start ups

* competition
* building a customer base
* lack of record keeping
* lack of working capital
* poor management skills
* changes in business environment

elements of a business plan

* business description
* competitor analysis
* management team and personnel
* marketing strategies
* operations
* financial forecasts

private sector

business owned and controlled by individuals or groups of individuals

public sector

organisations accountable to and controlled by central or local government. often provide essential goods and services for people

privatisation

the sale of a public sector organisation to the private sector

profit based organisations

* sole trader
* partnership
* private limited company (LTD)
* public limited company (PLC)

sole trader

a business that is owned and controlled by one person

partnership

a legal agreement between 2 or more people to own, finance and run a business

private limited company (LTD)

shareholders are limited to family, friends and business partners. shares cannot be sold to the public

public limited company (PLC)

shares are listed on the stock exchange and can be freely bought and sold by anyone

unlimited liability

the financial obligation of business owners in the event of business failure is to repay all business debts (even if it means selling off their personal possessions)

limited liability

the financial obligation of business owners for business debts is no more than the amount of capital they invested in the enterprise. this is because business owners with limited liability have a separate legal identity from their business

non-profit and non-governmental organisations (NGOs)

charities and pressure groups

social enterprise

a proper business that makes its money in socially responsible ways and uses most of any surplus to benefit society

microfinance

aka microcredit, a type of banking service provided to unemployed or low-income individuals

cooperatives

people-centred enterprises, owned, controlled and run by and for their members to realise their common economic, social and cultural needs

corporation

a legal entity that is separate and distinct from its owners

mission statement

where an organisation formally sets out and publicises its core objectives. it declares an organisations purpose (present)

vision statement

where an organisation sets out where it would like to be in the long term (future) based on its core objectives

aim of mission and vision statements

* give strategic decision making an overall sense of direction
* provide employees and managers with a sense of strategic direction of the business
* motivate employees and managers within the business and provide them with a reference point for their own aims and values
* attract outside stakeholders such as customers, banks, and investors to an organisation

common business objectives

* survival/breakeven
* cost minimisation
* growth (market share)
* profit maximisation
* profit satisfaction - achieve enough profit to make owners happy but not making as much profit as possible

aims

long-term goals that a business wants to achieve in the future

objectives

are targets set by an organisation to achieve its corporate aims

strategy

the long term plan that sets out the ways a business is going to achieve its corporate aims

tactics

specific techniques used by a business to achieve its objectives

ethical objectives

objectives influenced by moral values

corporate social responsibility (CSR)

where an organisation considers the interests of society by taking responsibility for the effects their decisions and activities have on customers, employees, communities, and the environment

SWOT analysis

a planning tool used by organisations as a method for guiding business strategy by considering the strengths, weaknesses, opportunities, and threats

* strengths and weaknesses (internal)
* opportunities and threats (external)

ANSOFF matrix

identify growth strategies. has 4 categories:


1. market penetration (existing products in existing market)
2. product development (new products in existing market)
3. market development (existing products in new market)
4. diversification (new products in new market)

social

demographics such as

* population size
* population structure
* lifestyle
* age groups
* fashions or tastes
* education levels

technological

* state of technological advancements
* introduction of new technologies
* infrastructure
* research and development costs

economic

* GDP growth rate
* inflation rates
* interest rates
* exchange rates
* the business cycle
* unemployment rates

environmental

* weather and climate
* flora and fauna of the region
* environmental pressure group activity
* carbon footprints

political

* type of government
* attitude towards, free markets, imposition of tariffs, trade policies, business incentives offered and the stability of the government

legal

* competition law
* health and safety at work
* consumer protection
* employee protection

ethics

the code of ethics followed by most people in the region and the tendency of the people to be ethical, corruption, fair trade

gearing

the extent of a firms external borrowing

competitive advantage

ability to compete against domestic and international rivals

alienation of the workplace

employees lose sense of purpose and achievement and they can become demotivated

poor coordination and slow decision making

increasing department and number of countries a business operates in can lead to a businesses inability to make rapid decisions