exam 222

Sources of Structure

  1. History of Structure:

    • Traditional structures (e.g., functional, hierarchical) evolved as organizations sought efficiency and scalability.

    • Henry Ford's assembly line introduced specialization and division of labor.

    • Larger organizations implement formal structures like a Board of Directors to oversee operations.

  2. Board of Directors:

    • Ensures governance, strategic planning, and oversight.

    • Typically includes internal executives (CEO, CFO) and external members for independent guidance.

Design vs Context

Organizations develop structures either by design (deliberate choices) or through context (environmental influence).

  1. Design – Choosing to Be a Way:

    • Organizations like Apple chose highly centralized structures under Steve Jobs.

    • Jobs controlled product design, marketing, and decisions, reducing delegation to ensure consistency.

  2. Context – Environment Makes It a Way:

    • External environments shape structure.

    • Airlines (e.g., United) develop procedures, such as pilot checklists, to manage risk and ensure safety in a highly regulated industry.

Characteristics of Structure

  1. Teams in Organizations:

    • Teams consist of individuals working together toward common objectives.

    • Permanent teams (e.g., committees) manage long-term functions, while temporary project teams handle specific tasks.

    • Self-directed teams manage themselves with minimal supervision, enhancing flexibility.

  2. Tensions in Structure:

    • Specialization vs Integration: Balancing highly specialized roles with cross-functional collaboration.

    • Formality vs Flexibility: Striving for structure (rules, processes) while maintaining agility.

    • Wide vs Narrow Span of Management: In wide spans, managers oversee many employees, while narrow spans allow closer supervision.

  3. As an Organization Grows:

    • Growth leads to decentralization—shifting decision-making authority to lower levels.

    • Organizations must adjust formalization and policies to avoid rigidity and maintain flexibility.

Marketing

Exchange and Creating Value

  • Marketing involves the exchange of products/services for money, reputation, or loyalty.

  • The goal is to create value by understanding and satisfying customer needs while achieving business objectives.

Segment, Target, and Position

  1. Segmentation: Dividing the market into groups based on demographics, behavior, or geography.

  2. Targeting: Selecting the most relevant segment to focus marketing efforts.

  3. Positioning: Crafting a brand identity tailored to the target market.

Example:

  • RyanAir positions itself as a low-budget airline.

  • United Airlines caters to different market segments through economy, business, and first-class services.

4 P’s of Marketing

  1. Product: The goods/services offered (e.g., Tesla cars).

  2. Price: Determining what customers will pay for the value received (e.g., luxury product pricing).

  3. Place: Distribution channels to make products accessible (e.g., Amazon warehouses).

  4. Promotion: Advertising and communication efforts to create awareness (e.g., Nike’s branding).

Market Research and Consumer Behavior

  • Market Research: Gathers information on customers to anticipate needs.

  • Consumer Behavior: Explores psychological and social factors that motivate buying decisions (e.g., end-cap displays in stores).

Accounting

Managerial vs Financial Accounting

  1. Managerial Accounting:

    • Used internally for planning and control.

    • Focuses on timeliness and decision-making for business strategy.

  2. Financial Accounting:

    • Reports historical data to external stakeholders (investors, regulators).

    • Uses GAAP (Generally Accepted Accounting Principles) to ensure consistency and comparability.

A = L + E (Accounting Equation)

  • Assets (A): Resources the business owns (e.g., cash, equipment).

  • Liabilities (L): Obligations owed to others (e.g., loans, wages).

  • Equity (E): Owners' claims on the company’s assets (e.g., stock, retained earnings).

Double-entry Bookkeeping

  • Every transaction is recorded in two accounts (one debit, one credit) to maintain balance.

    • Example: Buying supplies with cash decreases cash (asset) and increases inventory (asset).

Statements, Standards, and Limitations

  1. Income Statement: Shows profitability (Revenue - Expenses = Net Income).

  2. Balance Sheet: Reflects the company’s financial position (Assets = Liabilities + Equity).

  3. Cash Flow Statement: Tracks where cash is coming from (operating, investing, financing).

  4. Limitations: Accounting can't capture non-financial factors (e.g., brand equity).

Money

The Federal Reserve

  • The U.S. Federal Reserve (1913) is the central bank responsible for managing the economy’s monetary policy.

    • Monetary Policy: Controls money supply and interest rates.

    • Regulation: Supervises financial institutions and manages deposit insurance (FDIC).

    • Discount Rate: The interest rate at which banks borrow from the Federal Reserve.

Banking Basics

  1. Commercial Banks: Provide loans and hold deposits.

  2. Credit Unions: Non-profits serving specific groups, offering low-interest loans.

  3. Cashless Society: Rise of digital payments and cryptocurrencies.

  4. Robo-Investing: AI-powered investment platforms (e.g., Betterment).

Finance

Capital and Budgets

  1. Capital Structure:

    • Refers to the mix of debt and equity used to finance operations.

    • D/E Ratio: Measures risk based on borrowing vs equity (higher ratio = more risk).

  2. Budgets:

    • Capital Budgets: Focus on long-term investments (e.g., buildings, R&D).

    • Operating Budgets: Manage day-to-day expenses to ensure smooth operations.

Key Concepts in Finance

  • Risk Tolerance: The ability of the business to take financial risks.

  • Strategic Direction: Finance decisions must align with long-term goals (growth vs stability).