Comm - 1800: Foundations of Commerce Exam #1

What is a business?

- A system specifically designed to provide a good or service, tailor made, to suit a specific consumer need.

- Driven by purpose such as profit or philanthropy

Why organize?

- Durability: keep operating despite people leaving (turnover rate)

- Reliability: expectations and consistency (McDonalds across the world)

- Accountability: know where and when something goes wrong (inspections)

- Large Scale Technology: server rooms or stomping machines

- Power and Control: limit non-conforming behavior

- Legal Benefits: Contracts, ownership, liability (legal entity, less risk)

Sole proprietorship

Maximally flexible, maximum risk/accountability/liability (David Costanza Consulting)

Partnership

More employees and resources; General (shared) vs. limited (silent investors where liability is only investment); More resources, skills, employees

Corporations

Separate established, registered legal entity; Private (one person/family owned + can be big or small) vs. Public (stock sold to public, IPO, board of directors); Extended life legally and financially (continuation despite turnover)

Joint Ventures

2 or more business combine forces for a project, contract, or goal; commit resources (money, people, real estate) to a third company; isolates risk of big projects (boats, submarines, roads)

S-Corporations

Extended partnership with less than 100 partners; Have tax benefits, but are legally complex; Not required to inform others that they are classified as S-Corporation

Strategic Alliances

Ex. Airlines (Skyteam, OneWorld, Star Alliance); Businesses in a given industry cooperate; Extends companies reach with minimal risk

Co-Operatives

Ex. Ace Hardware; Small businesses join forces to compete; Some tasks are shares, others are independent

Socrates (5th Century BC)

- Transferrable management capabilities

- Manafers have duties

- Background of President Jim Ryan example

Sun Tzu (5th Century BC)

- "Business foundations are really old"

- Effect of terrain on outcomes (environments + advantages)

- Importance of information (customer desires, competitors, etc.)

- Unpredictability requires flexible strategies (changeable and adaptable)

- Environments interact with each other (political, military, government)

Adam Smith (1776)

- Division of labor (benefits of organization)

- Greatest gains where work can be broken down

- Need to dedicate resources (plan, assess, etc.)

- Use of machinery (technological benefit -> efficiency)

- Time savings (quality, time, fewer workers, speed, cost, less materials)

- Increased skills of workers

Karl Marx (1860s)

- Theory of capital

- Managerial control of labor (hierarchy, subordination of labor, and alienation)

- Resistance (workers can unite)

Frederick Winslow Taylor (1915)

- Scientific management

- Watched job and decided how to break it down into parts

- Redesigned jobs to maximize efficiency

- People are "tools" (hammer, wrench, equipment)

- "Under scientific management, worked look at employers as their best friends"

Max Weber (1922)

- Beureaucracy

- Sources of authority (why do people do what they're told?)

#Traditional - king, knight, lord (rich guys in charge) - won't word

#Charismatic - because you like your boss - won't work

#Rational-Legal - because the rules say so (consistency and simplicity - just follow the rules)

- Hierarchy of offices: organizational charts (managers, presidents, etc.)

- Formalized rules: Syllabus example + symmetrical information

- Career paths: Entry level -> president; work your way up

Mary Park Follet (1926)

- Humanism

- Compliance is context dependent

- Situations give orders (strong vs. weak examples)

- Weak situation (party) vs. strong situation (class)

- Can't and shouldn't depersonalize people - people oriented, not tools

- Humanism: leads to modern HR

Industrial Revolution

- Technology (steam, electricity, factories emerge)

- Subordination of labor (model and availability of cheap labor)

- Repeating itself in other countries today

- Working class and professional management

- Labor unions emerge as only self-advocacy

Hawthorne Studies (1941)

- Being watched/observed spurts efficiency

- Informal standards: work within a certain range as established by organization's culture

Herb Simon (1946)

- Contradictory proverbs: no singular method/strategy/formula

Bounded Rationality

- Thought process that isn't completely rational

- Limited information processing: so much stuff, not all is relevant

- Limits to considering alternatives (eat example - hunt, store, dining hall)

- Limits to prediction abilities

- Satisficing: best decision given what information you have

Satisficing

Best decision given what information you have

Open Systems Theory

- A theory stating that any human system, such as an organization, is constantly influenced by and is influencing its environment

- I.T.O: Inputs, throughputs, outputs

Differentiation

Specializing pieces of a company as it grows (HR, finance, marketing depts.)

Entropy

Organizations must add energy back into the system to keep it operating (Sears not adapting to e-commerce)

Homeostasis

Organizations strive for balance: inputs and outputs should be roughly equal -> desire to achieve steadiness (Cybertruck overproduction -> produce less example)

Equifinality

There is more than one way to adapt, survive, and thrive (McDonald's and Wendy's - different strategies, both successful)

General Environments

Some outside force that pressures all organizations within a given environment

General Environments Examples

- Political (Trump vs. Bidenomics; who's in power?)

- Economic (Fed cuts rates)

- Physical (natural disasters)

- Technological (AI)

- Social + demographic (movements, cultures, religions, ages)

- Cultural (values - Europe vs. US vacation time)

- Legal (federal, state laws - affects everyone)

Specific Environment

Outside forces unique to your specific business (can sometimes overlap ex. Cava and Chipotle)

Specific Environment Examples

- Competitors: UVA JMU VT examples

- Customers: who are they? who are they buying from? can we get more?

- Distributors and Suppliers: middlemen/delivery vs. wholesale (recruiter example)

- Unions and Labor: deal/negotiate with unions - differ by company (university NIL example)

- Government agencies and local regulators: OSHA, limits throughputs, accreditation

Environmental Complexity

How many are there? Proximity to each other? Interconnectedness?

Environmental Dynamism

How fast is it changing? (Tech vs. water example)

Environmental Richness

Availability of resources? (Rich vs. struggle) - customers, materials, labor

Environmental Uncertainty

Complexity + Dynamism + Richness (high, high, low = most uncertain; low, low, high = least uncertain)

Environmental Factors

- Labor + Materials (where is it best to do it and cheapest - Poland programmers example)

- Economic: banking, monetary policy, capital

- Legal + Political: employment, labor, tariffs, trade policies (Chinese EV tariff policy example)

- Social + Cultural: language, ritual, humor, values (time - nonscheduled bus vs schedules German taxi)

International Agreements

Created to facilitate and foster trade, minimize and standardize tariffs, and lessen environmental uncertainty

International Agreement Examples

- GATT: minimize trade wars

- EU: minimizes regulatory, legal, immigration limitation issues, currency, and economics

- USMCA: minimize legal, immigration, tax, and tariff issues

- ASEAU: trade, tariff, etc. issues in Southeast Asia

- World Bank/IMF: Loans money to countries with less capital