For-profit organisation: Runs primarily to get a profit, with any financial surplus used to further its organisation goals. Responsible to its investors (shareholders, stakeholders). Corporate social responsibilities are optional.

Non-profit organisation: Any profit is used to achieve the organisational goal. Other surplus is kept in the company for contingency and expansion.

Non-profit social enterprise: Operates with the purpose of a community or social goal while using traditional commercial practices. Profits reinvested

Charity: Mission drive, funded by donations, surplus reinvested, focus on societal gains

The nature and role of business:

Vocabulary:

Change: An act or process through which something becomes different.

Ethics: The moral principles that govern the behaviour of a person or group.

Sustainability: Meeting the needs of the present without compromising the ability of future generations to meet their own needs.

Creativity: the use of the imagination or original ideas, especially in the production of an artistic work.

Stakeholder: Any individual or group that affects, or is affected by, an organisation.

Entrepreneurs: A person who organises human, physical and financial resources to start a business.

Inputs: The human, physical and financial resources needed to create a product.

Physical resources: The raw materials and semi-finished goods that a business needs to begin production. Also include capital goods

Financial resources: The funds needed to set up and invest in a business and keep it running; can be short-term, medium-term and long-term.

Long-term financing: Large-scale funds needed to finance expensive equipment and facilities that a business needs to operate.

Short-term financing: Small-scale funds needed to pay for inputs that will soon be processed and sold by the business; used to cover short-term working capital needs.

Inventory: The raw materials used in production, as well as the goods produced that are available for sale.

Human resources: The people needed to run the business.

Goods: tangible, meaning they have physical characteristics and can be measured.

Services: intangible, meaning they cannot be touched or described by physical characteristics.
Feedback: Happen when the output of a system becomes an input to the same system.

Negative feedback: When the output feeds back into the inputs in a way that moves the system in the opposite direction.

Positive feedback: Occurs when the output feeds back into the inputs in a way that moves systems and processes in the same direction.

Competitive advantage: a condition or circumstance that puts a company in a favorable or superior business position.

Comparative advantage: When an entity can produce something at lower a price than another.

Economics-of-scale: Operating on a larger scale can enable firms to gain from lower unit costs of production. Insourcing production: Assigns a project to a person or department within the company instead of hiring an outside person or company

Segmentation: The process of dividing a company's target market into groups of potential customers with similar needs and behaviours

Overhead: The costs of running a business that are not directly related to producing a good or service.

.

Notes:

Systems:

Input:

• Physical

• Financial

• Human

Process:

Output:

• Goods

• Services

Feedback:

The Doughnut Economics Model:

Vocabulary:

Sociocultural sustainability: Provide for human needs and responsile for well-being of stakeholders.

Environmental sustainability: Businesses should actively work to improve the ecosystems of the planet

Economics sustainability: Businesses must maintain profit and loss, especially if they are providing for a human need, supporting the well-being of stakeholders, and providing tax revenue.

Doughnut Economics Model: A model that outlines the social foundation (human needs) and ecological ceiling (planetary boundaries) that economic activity needs to respect to find the 'safe and just space for humanity'.

Planetary boundaries (Ecological ceiling): The limits of planetary systems; the outer ring of the Doughnut Economics model.

Sustainable Developement Goals (SDGs): Collection of seventeen interlinked objectives designed to serve as a "shared blueprint for peace and prosperity for people and the planet, now and into the future.”

Notes:

Doughnut economics model:

Outer ring:

• Focused on natural environment.

• If we disturb these systems too much, it could cause permanent damage.

Red areas:

• Things we have already put too much pressure on.

• Includes climate change, biodiversity, land use, and nitrogen and phosphorus flows from fertiliser.

Inner ring:

• Human needs, or the social foundation.

• Food, water, shelter.

• Human networks, social equity, political voice, and work.

The Economy:

Vocabulary:

Economy: A system for producing and provisioning or distributing goods and services among a group of people.

Embedded economy model: A model that shows the economy embedded in nature, with inputs of energy from the Sun and outputs of waste; provisioning occurs through markets, households, the state and the commons.

Households: important care services are provided between people with strong relationships. Produced mainly with unpaid work

State: provides fundamental goods and services that everyone can access. At no or a low price. Funded mainly through taxes

Commons: provides shared goods and services produced by society or from nature. People use and distribute goods, services and resources through self-organised systems. There is no payment

Markets: provides goods and services produced by businesses. Businesses produce and sell goods and services in exchange for a price

Primary sector: A section of an economy that extracts materials (minerals, oil, etc.) or harvests products from the Earth.

Secondary sector: The area of economic activity that produces finished goods through manufacturing.

tertiary sector: The area of economic activity that provides services.

Quaternary sector: The area of economic activity involved with knowledge and the movement of information.

Supply chain: The steps involved in creating finished goods.

Integrated business: A business whose activities span two or more sectors.

Outsource: When a business takes an internal function and has it performed externally by another person or business.

Notes:

Embedded economy model:

The center of the model shows different groups of people that distribute goods and services:

• Households

• State

• Commons

• Markets

Starting a business:

Vocabulary:

SWOT: A business management tool that analyses the internal strengths and weaknesses as well as the external opportunities and threats for a business.

STEEPLE: A business management tool that analyses the external conditions that may be opportunities or threats for a business.

Notes:

A business has a good chance of success when:

• Skilled and collaborative team of employees

• Enough funding to run the business

• Well-researched marketing team.

• The operations are efficient and resilient.

Entrepreneur:

• Understanding communities and their problems

• Designing solutions

• Taking action

• Sharing actions and ideas for growth impact

Reasons to start a new business:

Challenges of starting a business:

Steps to start a business:

SWOT/STEEPLE:

Notes:

Internal factors:

External factors: (STEEPLE)

• S: Socialcultural (Demographics, health status, education, beliefs, values, etc)

• T: Techological

• E: Economic (Business cycles)

• E: Environmental

• P: Political

• L: Legal

• E: Ethical

Business plan:

Vocabulary:

Narrative bias: A mental shortcut that people can use to create stories that make sense of the world; people are often attracted to narratives.

Primary research: Research (in a market) that involves creating new information that is gathered through surveys, interviews, observations, focus groups, camera studies or other methods.

Secondary research: Research that involves using evidence (about a market) gathered by others.

Qualitative data: Non-numerical data that describes qualities or characteristics.

Quantitative data: Information that can be counted and has a numerical value.

Notes:

The Golden Circle:

Why:

• Vision and/or mission statement

• A description of the problem you are trying to solve.

How and what:

• Description of the solution to the problem you have described. This would include:

  • a product description

  • the legal structure of the business

  • the human resources needed

  • the location and facilities

  • the value that your product will bring and positive impacts on people and environment.

• Description of the market and competition or partners (social business)

• Marketing plan

• SWOT Analysis

• Cash flow forecast and budget

• Sources of finance, or request for financing if appropriate

Business Types:

Vocabulary:

Sole trader: A business owned and run by one person; there is no legal separation between the owner and the business.

Unlimited liability: A situation where the owners of a business are personally responsible for all the debts of the business if it fails; the owners and the business are not legally separated.

Partnership: A business owned and run by two or more people who share the responsibility for the business and the profits; there is no legal separation between the business and the owners

Company: A business owned by multiple shareholders who have limited liability; can be privately held or publicly held.

Limited liability: A situation where the owners of a business are not personally responsible for the debts of the business if it fails; the owners and the business are legally separated.

Privately owned companies: A company that is privately owned and often has family or friends as the shareholders; the shares are not sold to the wider public and are not traded on a stock exchange.

Publicly held companies: A company that is publicly owned and and has many shareholders who can buy and sell their shares through a stock exchange.

Initial public offering (IPO): A situation where a company sells all or part of the business to external shareholders for the first time.

Memorandum of Operation: States the details of the company

Articles of Association: states the internal roles and responsibilities of the board of directors and shareholders

Notes:

Sole trader:

• Owned by individuals and run a personal business

• Most common

• Start-up capital is usually from personal savings and loans.

• Advantages:

  • Easy to set up

  • Lots of profit

  • Fast-decision making

  • Personal service

  • Financial records remain private

• Diadvantages:

  • Unlimited liability.

  • Cannot be inherited and must be unregistered if the owner died.

  • Difficult to finance

  • High risk

  • Possible higher taxes (income tax rather than corporate tax)

Partnership:

• Owned by two or more

• The agreement includes the principal, profit/loss sharing, responsibilities, addition/withdrawal of partners, and the termination process between the partners.

• Advantages:

  • Easy to set up

  • Greater access to finance

  • Greater efficiency and productivity

  • Financial records remain private

• Disadvantages:

  • At least one partner has unlimited liability

  • Lengthier decision-making and potential for disagreement

  • Legal mistakes caused by one will affect the other.

  • If one partner dies, the agreement is terminated

Limited liability companies:

• Owned by shareholders

• They invested money to provide capital

• Incorporated business; separate entity from owner - limited liability

• Private-held and public-held.

Privately held companies:

• Owned by friends or family

• Requires a Memorandum of Operation.

• Requires Articles of Association.

• Advantages:

  • Control and ownership

  • Greater access to finances

  • Limited liability

  • Able to take a longer-term view on the business’s development

• Disadvantages:

  • Profits are shared between many shareholders

  • Lengthier decision making

  • Shares cannot be traded to increase finances

  • May not be examined by external experts

  • Expensive

Publicly held companies:

• Held by the general public.

• Requires a Memorandum of Operation.

• Requires Articles of Association.

• Advantages:

  • Finances can be earned through shares

  • The risks are shared amongst a large group of people

  • Separate legal identity

  • Limited liability

• Disadvantages:

  • Shared profits

  • High costs

  • Outsiders can gain control by becoming a major shareholder

  • Accounts are publicly available for review

Private and public sectors:

Vocabulary:

Private sector: The portion of an economy not owned or directed by the government.

Multinational companies: A company that operates in at least two countries, one of which is not the company's home country.

Public sector: The portion of the economy controlled or owned by the government such as government services, schools and state-owned businesses.

Tax: A payment by individuals or businesses to the government.

Notes:

Private sector:

• Private ownership and control

• Profits can be earned by workers.

• Little or no government involvement

• Largely privately-funded

Public sector:

• Owned and controlled by the government

• Provides essential goods and services to citizens

• Financed through tax and public funds

• Answerable to the public for any actions taken

  
  

Social enterprises:

Vocabulary:

Social enterprises: Any organisation that has a social and/or environmental purpose at its core; it describes the primary purpose of a business, not its legal form.

For-profit social enterprise: type of social enterprise that earns revenue and profits, but integrates social and/or environmental impact directly into its business model.

Private sector for-profit social enterprise: A type of social enterprise that produces goods and services that are typically sold in markets for a price by for-profit businesses.

Public sector for-profit social enterprise: A type of social enterprise that produces goods and services that are typically provided by the public sector.

Cooperative: A business owned and operated by its members, who share the profits.

Non-profit social enterprises: A type of social enterprise that produces goods and services to meet human needs, but where any surpluses earned must, by law, be reinvested back into the business.

Outsource: When a business takes an internal function and has it performed externally by another person or business.

Non-governmental organisations (NGO): A sub-category of non-profit social enterprises that are not owned by government, but may get government funding.

Notes:

Types of cooperative:

For-profit social enterprise:

• Positive impact on the world

• More economically sustainable than non-profit social enterprises.

• Attract an increasing number of customers, investors and talented employees who value sustainable and responsible businesses

• Require patient capital, so it has to choose sources of finance that closely follow their values

• Needs to be transparent to gain trust from both profit-driven and purpose-driven people

• Gathering concrete data is harder but more important for transparency

• Stricter management of the supply chain to ensure everything follows values.

• They must remain true to purpose

Non-profit social enterprise:

• Any surplus generated is required by law to be reinvested into the business to increase its impact, meaning there is no tax.

• Typically have limited liability

• May rely on volunteers to save costs

• Funding problems may persist over time

  • Time is wasted finding grants rather than fulfilling core purpose

  • Not enough to pay employees, which may lose talents

• Can be significant paperwork.

Vision and Mission:

Vocabulary:

Vision statement: A long term goal, a dream or understanding of what the future should look like.

Mission statement: A short statement that defines what the organisation does, right now, in order to achieve its vision.

Value: All the benefits that a business creates for the stakeholders involved.

Outcome: A stated outcome that a business aims to achieve; can be broadly stated in vision and mission statements, or more narrowly stated with measurable outcomes.

Growth and profit:

Vocabulary:

Unit (average) cost: The cost of producing a single unit of output.

Value extraction: The capturing of value from other stakeholders, either outside or inside the business.

Corporate social responsibility:

Vocabulary:

Corporate social responsibility: Businesses actively seeking ways to improve society and the environment through core business activities and business designs.

Generative/regenerative businesses: A business that aims to strengthen its social and environmental ecosystems by creating opportunities for other businesses and communities to develop, and by restoring the natural environment.

Notes:

Ecological responsibilities:

• Local ecological: How can a business support a thriving local environment?

• Global ecological: How can a business respect the health of the entire planet.

Social responsibilities:

• Local social: How can our business support the well-being of the local stakeholders?

• Global social: How can our business respect the well-being of people worldwide.

Benefits:

• Long-term revenue as people have aligning values

• Consumers stay loyal and pay more

• More passionate and loyal employees

• Act as safety measures if something political were to happen.

Limitations:

• May be difficult to change the way things work, especially with shareholders.

• Increase cost-of-production in the short-term

• Reputational risk of not being able to fulfill wishes

Strategies and tactics:

Vocabulary:

Product portfolio: All of the goods and services that a business offers.

Linear production: Taking resources from the Earth, making products with them and then disposing of the products.

Circular production: A production model that reduces waste by ensuring outputs of the production system feed back into the system as inputs.

Strategy: A plan that an organisation creates in order to reach a specific goal.

Tactic: A small action that a business takes to reach its goals.

Notes:

Research:

• Understanding of mission and vision statements

• Market research

• Social and ecological factors, locally and globally

• SWOT

• Financing

• Milestones of progress

Circular business models:

Vocabulary:

Circular business model: A business model that enables businesses to reduce new material inputs, replacing them with recovered or bio-based materials.

Cradle-to-cradle product design: A design and production process that aims to work more like nature, by designing systems that feed back outputs as inputs, and by designing out waste from the start; akin to circular business models and production.

Resource recovery models: Business models that are focused on collecting, sorting and processing waste materials to be used as inputs in the production process.

Product-life extension model: Business models that focus on extending the time that a consumer uses products.

Sharing model: A business model that allows consumers to share the use of products with strangers, reducing the new inputs needed for products that might be underutilised by the consumer.

Product service system model: Business models that involve selling the service for using a product rather than selling the product itself.

Notes:

Principles of a circular economy:

• Eliminate waste and pollution

• Circulate products and materials

• Regenerate nature

Circular supply model:

Resource recovery mode:

• Collecting waste materials

• Sorting wastes into different types

• Secondary production where was is transformed into raw materials

Product-life extension model:

• Design for durability, thus premium price can be charged

• Reuse and repair so that products are genuinely used to the end of their life.

• Remanufacturing, essentially resetting its life.

Sharing model:

• Co-ownership is the lending of physical goods

• Co-access allows many to take part in an activity that would’ve occurred regardless of number of participants.

Product service system model:

• Product-oriented focus on selling products and associated after-care services.

• Meanwhile, user-oriented involves customer paying for temporary access to a product; renting.

Limitations:

• Undeveloped systems for waste recovery

• Increased use of bio-based materials, which may reduce space for agriculture and farming.

• Negative unintended consequences

• Rebound effects when people spend saved money on more consumption that balances out the benefits

• Some growth-oriented business models have a core model that is so damaging circular models cannot fix.

• Does not associate with social problems.

Stakeholders:

Internal stakeholders: An individual or group that affects, or is affected by, an organisation and is directly involved inside the organisation.

External stakeholders: An individual or group that affects, or is affected by, an organisation, but who is not directly involved inside the organisation.

Labour unions: Represent employees in many different companies to defend employees’ interests than the employees in a single company acting alone

Notes:

Internal stakeholders:

• Manager

• Employee

• Shareholders:

  • Appoint a board of directors which chooses a CEO in the shareholder’s interests. This makes it so that shareholders can be internal stakeholders as well.

External stakeholders:

• Customers

• Suppliers

• Governments

• Labour unions

• Banks and financial institutions

• Society

Stakeholder alignment:

• More aligned in the long term

• Economic sustainability

• Sociocultural sustainability

• Environmental sustainability

Stakeholder conflict:

• Manager vs employee

  • One wants to maximize efficiency while the other wants less stress

• Shareholders and managers:

  • Managers may look after their own interests rather than improving profts. One solution is to allow manager stock options to naturally align their interests.

• Shareholders and the government:

  • Shareholders may force corporations to minimize tax through schemes, which is not in the best interest of the government.

• Local community and shareholders:

  • Communities want their local areas to be preserved while shareholders may want to exploit it.

• Managers and unions:

  • Managers may oppose conforming to unions’ request in increasing pay and better working conditions.

• Customers and suppliers:

  • Customers want high quality products at low prices which is against suppliers wanting low quality goods at high prices.

• Pressure groups and employees:

  • Pressure groups may oppose certain projects that harm the environment.

ESG criteria:

• Eliminate harmful pollutants.

• Improving community relations and encouraging diversity

• Promoting corporate transparency

How to design stakeholder alignment:

• Designing manager compensation to align with long-term performance of the business

• Designing more flexible work policies

• Community feedback

Porter’s generic strategy:

Vocabulary:

Cost leadership: Aims to establish a competitive advantage by achieving the lowest operational costs in the market for a particular good or service.

Differentiation: When a firm makes its mass-market products distinct from those of its competitors

Focus - Costs: businesses compete based on price to target a niche market. They charge low prices relative to competitors in the same market.

Focus - Differentiation: When a business targets a niche or single segment of the market with quality products.

Notes:

Cost leadership:

• Only way to compete with these firms is through penetration or predatory pricing strategies.

• Economics of scale

• Improved supply chains - Own their suppliers

• Relocation

• Insourcing production

• It is about minimising costs, not price.

Differentiation:

• Branding

• Quality rather than costs.

• Can be costly to setup

• Usage of copyright and patents to protect their competitive advantage

Focus - Cost:

• Costs can be kept low by concentrating on a limited number of products or by focusing on a small geographical area.

Focus - Differentiation:

• Can be a highly profitable strategy due to the high prices that can be charged and lack of competition.

• The drawback is that the market size is rather limited.

Stuck in the middle:

• Neither a cost leader or a differentiator, and that it is not focused either.

• Creates confusion for both internal and external stakeholders of the business

• With no competitive advantages and loses the ability to gain customer loyalty.