Unit 2 Business Management

Concept of Vision Statement

What do we want?

Concept of Mission Statement

Why are we doing it?

Vision Statement Purpose

How the business wants to see itself

Vision Statement Audience

Internal stakeholders to inspire and motivate

Vision Statement Change

Shouldn’t change

Mission Statement Purpose

Communicates what needs to be achievd to fulfill the vision

Mission Statement Audience

Internal stakeholders to show accountability by defining key performance indicators/external stakeholders as a measurement of how successful a business is at achieving the vision

Mission Statement Change

it may change to meet new circumstances as time passes

Vision

a business’ long term goals

Strategic Objective

medium-long term goals set by senior managers to guide a company to its visions

Tactical Objectives

medium-short term goals set by middle managers to guide a company to its strategic objectives

Operational Objectives

day-to-day goals set by floor managers to guide a company to its tactical objectives

SMART acronym

specific, measurable, achievable, relevant, time-specific

Business Strategy

a plan to achieve a strategic objective in order to work towards the aims of the businesses

What does business strategy analysis involve?

where the business is, development of a strategy to reach aims, how to implement the strategy, a periodical evaluation plan to see if the plan is working

Business Tactic

a plan to achieve a tactical objective to work towards business strategy

Stakeholder

Anyone connected to a business

Ethical Objective

a deliberate attempt by an organization to take a position that is morally correct and appropriate in the eyes of stakeholders

Advantages of Having Ethical Objectives

builds customer loyalty, makes a positive image, betters the work environment, reduces risk of legal action by stakeholders, increases profits, more dependable employees

Corporate Social Responsibility (CSR)

the concept that a business has an obligation to operate in a manner that has a positive impact on society and take responsibility for their actions

How do businesses take responsibility?

getting licenses and permits, paying taxes, not scamming, honoring contracts, creating an equitable workplace, protecting whistleblowers, ensuring that products follow safety regulations

Limits of Ethical Objectives

businesses have to change culture to match CSR, short-term increase in costs for training in ethics and sustainability, reputations risks if firms don’t follow through with CSR commitments

Linear Production

making products using resources then disposing of them

Circular Production

reducing waste by converting used outputs into production inputs

Circular Business Model

mirrors nature by designing systems that compliment circular production

Goals of Circular Businesses

eliminate waste and pollution, circulate products and materials, regenerate nature

Circular Supply Model

uses reused or bio-based materials in production to reduce their environmental impact

Resource Recovery Model

focuses on collecting, sorting, and processing waste materials

Product Life Extension Model

extending how long a customer uses a product by making them durable, reusable, repairable, and remanufacturable

Sharing Model

allowing consumers to share products with strangers so that products aren’t underutilized

Co-ownership Sharing Model

lending out physical goods

Co-access Sharing Model

allowing other to take part in an activity that was already in progreess

Product Service System Model

selling a service to use a product rather than the product itself

Product-oriented Product Service System

selling after sale services such as maintenance and repair

User-oriented Product Service System

paying for temporary access to a product, often through leasing

Limitations of Circular Business Models

underdeveloped resource recovery systems, bio-based material takes up farmland, negative unintended consequences, rebound effects, circular strategy might not counteract harmful business model, ignorance of social issues

Rebound Effects

when part of a business’ actions negates the positive effects of a circular business model

stakeholder

any individual or group affected by or that has an impact on an organization

What are the 2 types of stakeholders?

internal and external

internal stakeholder

a stakeholder directly involved inside an organization

external stakeholder

a stakeholder without direct involvement inside an organization

List of internal stakeholders

managers, employees, shareholders

List of external stakeholders

customers, suppliers, governments, labor unions, banks and financial institutions, society

Managers

people who run an organization. they make aims and objectives and make a good work environment. interested in promotions and benefits

Employees

people working for a business. want job security, fair pay, and a good workplace. recently taken on managerial roles

Shareholders

owners who invest in a business to make returns. most concerned about profits.

Customers

individuals, groups, and firms that purchase an organizations products. demands for good service and safe, high quality products at a reasonable price, push businesses to act ethically

Suppliers

individuals and firms that sell to organizations. they want to maintain a stable businesses relationship, so they care about their consumers health and safety.

Governments

regulate organizations to protect public interests. reliant on tax revenue and high employment

Labor unions

protect livelihood and rights of employees.

Banks and financial institutions

lend money to organizations that they want returned with interest. monitor businesses’ financial health

Society as an external stakeholder

pressure groups, local communities, environmentalists

Managers vs Employees

productivity vs stress

Shareholders vs Managers

increasing profits vs personal benefits

Government vs Shareholders

pay taxes vs pay as few as possible

Local Community vs Shareholders

sustainability vs maximum profits 

Managers vs Unions

too many employee benefits vs get as many employee perks as possible

Customers vs Suppliers

high quality, low price vs fair pay

Pressure Groups vs Employees

safe/healthy environment vs job accessibility

Scale of Operation

the maximum output that can be achieved using the available inputs

Economies of Scale

the reduction in per unit production costs due to an increase in the scale of operations

Internal Economies of Scale

cost reductions that can be achieved inside the company when it expands its output

External Economies of Scale

cost reductions caused by external factors in regions and industries that aren’t controlled by the business

List of Internal Economies of Scale

purchasing, marketing, managerial, technical, financial

Purchasing Economies of Scale

buying in bulk gets discounts

Marketing Economies of Scale

the cost of a marketing campaign spreads over a larger output which lowers the average cost of the campaign

Managerial Economies of Scale

as businesses grow, they hire more management and specialists in the 4 business functions. This reduces waste and costs.

Technical Economies of Scale

buying costly technology that saves money in the long run

Financial Economies of Scale

getting low interest rates or getting capital by selling shares

List of External Economies of Scale

innovation, infrastructure, specialization

Innovation Economies of Scale

innovation lets businesses partner with research institutions to create better products with lower research costs

Infrastructural Economies of Scale

good transportation helps products and workers move faster. increases productivity

Specialization Economies of Scale

specialized workers reduce costs of extra recruitment and training

Diseconomies of Scale

the increase in per unit production costs as the scale of operation increases

Internal Diseconomies of Scale

caused by the difficulty of managing internally large operations

External Diseconomies of Scale

caused by the expansion of the industry the business operates in

Other cause of diseconomies of scale

moral/efficiency collapse

List of Internal Diseconomies of Scales

managerial issues, increase in workforce size, communication

Managerial Diseconomies of Scale

it’s hard to run an enterprise efficiently once it gets larger

Workforce Size Diseconomies of Scale

it’s hard to control large workforces

Communicative Diseconomies of Scale

as organizations get more complex, senior managers and employees get more layers between them, making communication harder

List of External Diseconomies of Scale

limited natural resources, limited infrastructure, increased regulation, pollution

Limited Natural Resources Diseconomies of Scale

when businesses grow their outputs they need a greater input of natural resources

Limited Infrastructure Diseconomies of Scale

when industries expand, businesses will need more infrastructural support

Increased Regulation Diseconomies of Scale

when an industry expands and gains power, governments will watch those businesses carefully

Pollution Diseconomies of Scale

CO2 causes climate change

Why do businesses want to grow?

increase profits, increase market share, increase economies of scale, increase power and status of owners and directors, reduce risk of being a takeover target

Advantages of Business Growth

economies of scale, new customers and markets, influence on prices, can face peers, get talented employees

Disadvantages of Business Growth

cash flow issues, quality issues lead to less revenue, loss of control, labor turnover if HR is bad

Small business

an enterprise with less than 500 employees

Characteristics of Small Businesses

high costs of production, make up 40% of the economy, offer more jobs, in between large companies and customers

Advantages of Small Businesses

able to invest where they feel is most profitable, feel exclusive, sometimes employees are more motivated, personalized service and flexibility, focus on niche markets without competition

Organic Business Growth

expansion by opening new branches, shops, or factories with their own resources. facilitated with business profits

Inorganic Business Growth

expansion via entering an arrangement to work with other businesses

Examples of Inorganic Business Growth

M and A, Joint Ventures, Strategic Alliances, Franchise

Joint Venture

[find a better definition]

Merger

an agreement by the shareholders and management of two businesses to combine the enterprises under one BOD and lets shareholders from each company own shares of the combination

Acquisition and Takeover (Joint Definition)

when a company buys over half the shares of another to become the controlling owner

Acquisition

one company buys another with permission from the overtaken company’s BOD

Takeover

one company buys another without permission of the overtaken company’s BOD