Management Tools & Principle

Session 2

Chapter 1: Developing a Business Mindset

Gross domestic product (GDP) = PIB

What is a business?

Business are organizations.
An Organization is a Group of people with a common purpose (goals) and created structure (means).

Types of businesses

For-profit organizations: Organizations that provide goods and/or services with a profit and “asset building” motive.

Not-for-profit organizations: Organizations that provide goods and services without having a profit motive; these are also called nonprofit organizations.

!!! This does not mean that they do not make a profit.

Goods-producing businesses: Create value by making “things,” most of which are tangible.

• Goods can be tangible (car) and intangible (software)

• Goods-producing businesses are often capital-intensive businesses.

Service businesses: Create value by performing activities that deliver some benefit to customers.

• Service businesses tend to be labor-intensive businesses.

What business do?

Business: Any profit-seeking organization that provides goods and/or services designed to satisfy the customers’ needs. It creates value by transforming lower-value inputs into higher-value outputs.

Example:

• Each business adds value to the input.

Revenue (aka. income): Money that a company brings in (money income) through the sale of goods and services.

Profit: Money left over after all the costs involved in doing business have been deducted from the revenue.

In very general terms: Profit= Revenue (money income) - Expenses (money outcome)

!!! Profit =/= Cash:
Profit: accounting term =/= Cash: reality

“Accounted Profit” does not guarantee the reception of the money (we account when we sell, not when we get paid) AND there are expenses which are “not paid” in the period they are accounted (Amortization and Depreciation).

Business Model: A concise description of how a business generates or intends to generate revenue.

(How the company Creates and Exchanges Value).

• Source of innovations

• Alexander Osterwalder “Business Model Generation”

• Small business model changes can translate into large scale disruption of industries.

Ex: meal-kit industry, gobble innovated by pre-chopping ingredients.

Ex: Spotify.

• Comparison of business models between: Amazon/Carrefour, Lufthansa/Ryanair, Netflix/YouTube.

Competitive advantage: Aspect of a product or company that makes it more appealing to its target customers. It can be anything that distinguishes your value proposition in front of your consumer.

Risk/Reward vs Moral Hazard

What is Management?

Who knows? Business Mindset

Major environments of business

Social environment: Trends and forces in society at large (demographics, education level, purchasing power...). It can affect demand, composition of the workforce, and the “appropriate” way of doing business.

Stakeholders: Anyone affected by a company’s decisions/activities

!!! Stakeholders =/= Shareholders

Technological environment: Forces resulting from the practical application of science to innovations, products, and processes. (medical advancements, availability of technology...)

Disruptive technologies: they change the nature of an industry. They can create or destroy entire companies (internet, email, phone, electric cars…)

Economic environment: conditions and forces that affect the cost and availability of goods, services, and labor, shaping the behavior of buyers and sellers.

Legal and regulatory environment: Laws and regulations at local, state, national and international levels.

Market environment: target customers, influences on the behavior of those customers, and competitors with similar products.

Functional areas in an enterprise

Manufacturing, production and operations: Defines How the company makes what it makes (products) or does what it does (services).

Operations management: management of the people and processes involved in creating goods and services. Operations managers take decisions about purchasing, logistics and facilities management.

Ex: Purchasing, logistics, facilities management, quality control, …

Marketing: Understand and identify opportunities in the market, develop the products to address those opportunities, create brand and promotion strategies, set prices and distribution channels.

The sales function develops relationships with potential customers and persuades customers, transaction by transaction, to buy the company’s goods and services.

Research and development (R&D): Functional area responsible for conceiving and

designing new products.

Information technology (IT): Systems that promote communication and information usage through the company, or that allow companies to offer new services to their customers.

Finance and Accounting: Getting the funds it needs to operate, monitoring and controlling how those funds are spent, keep records for managers and outside audiences (investors, tax).

The jobs related to accounting are management accountant, internal auditor, public accountant, and forensic accountant (investigating financial crimes).

The jobs related to finance are controller, treasurer and finance officer, credit manager, and cash manager.

Human resources (HR): Recruiting, hiring, developing, and supporting employees.

Business services: Help company with legal needs, banking, real estate, and other areas.

Also in the book

Barrier to entry: Any resource or capability a company must have before it can start competing in a given market.

• There is a high barrier to entry for capital-intensive businesses because they require large amounts of equipment to get started and to operate.

• Barriers to entry can also include government testing and approval, tightly controlled markets, strict licensing procedures, limited supplies of raw materials, and the need for highly skilled employees.

The seven key traits of professionalism: striving to excel, being dependable and accountable, being a team player, communicating effectively, demonstrating a sense of etiquette, making ethical decisions, and maintaining a positive outlook.

Professionalism: The quality of performing at a high level and conducting oneself with purpose and pride.

Etiquette: The expected norms of behavior in any particular situation.

Session 3

Chapter 2: Understanding basic economics.

Define economics, and why scarcity is central.

Economy: The total sum of all the economic activity within a given region (The economy of the city of Segovia, of Segovia province, of CyL, of Spain, of the European Union...)

Economics: The study of how a society uses its scarce resources to produce and distribute goods and services.

Microeconomics: How consumers, businesses, and industries determine the quantity of goods demanded/supplied at different prices.

Macroeconomics: “Big picture” issues in an economy: competitive behavior among firms, effect of government policies, and overall resource allocation issues.

Factors of Production: resources owned by a certain country/society.
Every good or service is created from a combination of 5 factors of production.

The 5 Factors of Production:

Natural resources: Land, forests, minerals, water, fuels, ...

Human resources: People who work in an organization or on its behalf.

Capital: Funds that finance the operations of a business + physical elements used to produce goods and services (machinery, tractors, computers).

Entrepreneurship: Willingness to take the risks to create and operate new businesses.

Knowledge (Know-How): Expertise gained through experience or association.

Scarcity: A condition of any productive resource that has a finite supply. Scarcity generates competition and forces trade-offs.

Opportunity cost: The value of the most appealing alternative not chosen. Trade-offs force us to choose alternatives and generate opportunity costs.

Major types of economic systems.

Economic system: Policies that define a society’s particular economic structure. Rules by which a society allocates resources.
Planned ⬄Free Market

Free Market System: Decisions about what and how much to produce are made by the market’s buyers and sellers, not the government.

Capitalism: Economic system based on economic freedom and competition.

Planned System: Government controls most of the factors of production and regulates their allocation.

Socialism: Public ownership/operation of key industries combined with private ownership and operation of less-vital industries.

Nationalization: A government’s takeover of selected companies or industries.

Privatization: Turning over services once performed by the government and allowing private businesses to perform them instead.

Demand and supply.

Demand: The quantity of a certain product or service that buyers are willing and able to purchase at different price points.

Supply: The quantity of a certain product or service that sellers are willing and able to sell at different price points.

Demand curve: A graph of the quantities of a product that buyers will purchase at various prices.

Supply curve: A graph of the quantities of a product that sellers will offer for sale, regardless of demand, at various prices.

Equilibrium point: Point at which quantity supplied equals quantity demanded.

Macroeconomic issues essential to understanding the economy.

Competition in a Free-Market System

Competition: Rivalry among businesses for the same customers.

Pure Competition (The opposite of a Monopoly): So many buyers and sellers exist that no single buyer or seller can individually influence market prices.
Companies are price-takers.
Peter Thiel – Zero to One: “Pure competition is considered both “the ideal” and the “default” state of business”: why?

Monopoly (The Opposite of a Pure Competition): One company dominates a market to the degree that it can control prices. It can be pure monopoly that happens naturally, or regulated monopoly created by the government.

!!! Monopolistic competition: A situation in which many sellers differentiate their products from those of competitors in at least some small way.

Oligopoly: Market situation in which a very small number of suppliers, sometimes only two, provide a particular good or service.

Business Cycles

Business cycles: Fluctuations in the rate of growth that an economy experiences over a period of several years.

Recession: A period during which national income, employment, and production all fall. It is defined as at least six months of decline in the GDP.

!!! Economic expansion (growing economy) vs economic contraction (falling economy).

Unemployment

Unemployment rate: The portion of the labor force (everyone over 16 who has or is looking for a job) currently without a job.

Inflation and deflation

Inflation: Economic condition in which prices rise steadily throughout the economy.

Deflation: An economic condition in which prices fall steadily throughout the economy.

Purchasing power: Le pouvoir d’achat

Deregulation and role of governments.

Government’s Role in a Free-Market System:

• Protecting stakeholders

• Fostering competition

• Encouraging innovation and economic development

• Stabilizing and stimulating the economy.

Regulation: Relying more on laws and policies than on market forces to govern economic activity.

Deregulation: Removing regulations to allow the market to prevent excesses and correct itself over time with market forces.

Stabilizing and Stimulating the Economy:

Monetary policy: Government policy and actions taken by the country’s central bank (Federal Reserve in the US; EU Central Bank in Europe) to regulate the nation’s money supply.

Fiscal policy: Strategy for the use of government revenue collection and spending to influence the business cycle.

Major Type of Tax:

Measuring economic activity.

Economic Measures and Monitors

Economic indicators: Statistics that measure the performance of the economy.
Leading Indicators – Show Future Predictions.
Lagging Indicators – Show Confirmation of past events.

Price Indexes

Consumer price index (CPI): Monthly statistic that measures changes in the prices of a representative collection of consumer goods and services.

Producer price index (PPI): Statistical measure of price trends at the producer and wholesaler levels.

Gross domestic product (GDP): Value of all the final goods and services produced by businesses located within a nation’s borders; excludes outputs from overseas operations of domestic companies.

Session 4

Chapter 3 The global Marketplace.

Money and Banking

The meaning of money

Money: A generally accepted means of payment for goods and services; serves as a medium of exchange, a unit of accounting, a store of value, and a standard of deferred value.

Money has four essential functions:

1. A medium of exchange: to facilitate transactions.

2. A unit of accounting: Provide value in transaction.

3. A temporary store of value: Can be accumulated (saved)

4. A standard of deferred payment: It can represent debt obligations.

Fiat money: Official currencies issued and maintained through government fiat, or proclamation/decree: EUR, USD, Pesos, Cordobas, Yuan, Yens.

The term "fiat" is a Latin word that is often translated as "it shall be" or "let it be done."

Fiat currencies only have value because the government maintains that value; there is no utility to fiat money in itself.

Characteristics of Money (Currency, not cash)

Any currency should be: Divisible, Portable, Acceptable, Scarce, Durable, and Stable in Value

Money supply: The amount of money in circulation at any given time.

• M1 consists of cash held by the public and money deposited in a variety of checking accounts (Money spendable now)

• M2 consists of M1 plus savings accounts, balances in retail money-market, mutual funds, and short-time deposits (Money that could be spendable fairly soon)

Cryptocurrency: Currency represented by digital tokens: Bitcoin, Ethereum, Solana.

It appeals to many people because of its anonymity and because its value can't be manipulated by central banks in the same way fiat currencies can.

Cryptocurrencies such as Bitcoin are digital currencies not backed by real assets or tangible securities. They are traded between consenting parties with no broker and tracked on digital ledgers.

Central Banks

Central Banks regulate banks and implement monetary and fiscal policy.

Ex: Federal Reserve: Central bank of the U.S.; European Central Bank (ECB); Bank of China; Bank of England, others.

The Fed's Major Responsibilities:

1. Conducting monetary policy as required by Congress, with three objectives: maximizing employment, keeping prices stable, and keeping inflation under control.

2. Maintaining the stability of the financial system by minimizing systemic risks (financial risks that extend beyond any single bank or other company)

3. Supervising and regulating individual financial institutions. Ensuring a secure and efficient payment system to support financial transactions, including providing an adequate supply of currency and processing checks and electronic payments.

4. Protecting consumers and promoting community development by ensuring fair lending, fair housing, and community reinvestment.

Banking concepts

Federal funds rate: The interest rate that member banks charge each other to borrow money overnight from the funds they keep in their Federal Reserve accounts.

Three mechanisms to adjust the federal funds rate:

• Buying and selling: Treasury bonds, bills, and notes. Most powerful tool.

• Adjusting reserve requirements

• Lending through the discount window

Discount rate: The interest rate that member banks pay when they borrow funds from the central Banks.

Prime rate: The interest rates a bank charge its best loan customers.

The Federal Deposit Insurance Corporation FDIC: To protect money in customer accounts and to manage the transition of assets whenever a bank fails. Banks pay a fee to join the FDIC network, and in turn, the FDIC guarantees to cover any losses from bank failure up to a maximum of $250,000 per account.

(NCUA) The National Credit Union Administration: Provides regulatory supervision and account protection for credit unions.

Fannie Mae and Freddie Mac:

Investment banks: Firms that offer a variety of services related to initial public stock offerings (IPOs), mergers and acquisitions (M&A), and other investment matters.

Investment banks provide some combination of the following services:

• Facilitating mergers, acquisitions, sales, and spin-offs of companies

• Underwriting initial public offerings (when a company sells shares of stock to the public for the first time)

• Managing and advising on investments

• Raising capital (such as by selling bonds) on behalf of corporate or government clients

• Advising on and facilitating complex financial transactions

• Investing in or lending money to companies

• Providing risk management advice

• "Making markets" for clients, which involves acting as an interim buyer or seller to help clients acquire or divest assets.

Commercial banks: Banks that accept deposits, offer various checking and savings accounts, and provide loans; note that this label is often applied to banks that serve businesses only, rather than consumers.

Private banking: for wealthy individuals and families.

The major types of commercial banks:

• Retail banks serve consumers with checking and savings accounts, debit and credit cards, and loans for wthmes, cars, and other major purchases.

• Merchant banks offer financial services to businesses, particularly in the area of international finance. Merchant banking is sometimes more narrowly defined as the management of private equity investments, making it more akin to investment banking.

• Thrift banks, also called thrifts, or savings and loan associations, offer deposit accounts and focus on offering home mortgage (=hypothèque) loans.

• Credit unions are not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses. Note that thrifts and credit unions do not refer to themselves as banks, but the broad definition of banking used here distinguishes them from investment banks.

• Private banking refers to a range of services for wealthy individuals and families, such as managing real estate and other investments, setting up trust funds, and planning philanthropic giving.

BANKING'S ROLE IN THE ECONOMY:

Banking plays an essential role in the modern economy, but safe and stable banking is a vital social need.

Fintech: (ex. Betterment) Fintech refers to a wide range of technological innovations.

that have the potential to improve financial services and, in some instances, radically disrupt them. Five major categories of fintech innovations include making financial services more inclusive, improving efficiency of financial activities, strengthening security of financial systems, improving the customer experience in financial services, and enhancing financial decision making.

Fintech involves a variety of technologies, including artificial intelligence (AI), cloud computing, and mobile apps, with both customer-facing and back-office technologies.

Nedbanks: Banks that provide services entirely through mobile and digital channels. (Ex. N26)

Economic globalization: The increasing integration and interdependence of national economies around the world.

Why nations trade

Why countries and companies trade internationally.

1. Focusing on relative strengths: specialization and exchange will increase a country’s total output and allow trading partners to enjoy a higher standard of living.

2. Expanding markets: Many companies have ambitions too large for their own backyards.

3. Pursuing economies of scale: By expanding their markets, companies can benefit from economies of scale, which enable them to produce goods and services at lower costs by purchasing, manufacturing, and distributing higher quantities.

4. Acquiring materials, goods, and services: No country can produce everything its citizens want at prices they're willing to pay, so companies and consumers alike reach across borders to find what they need.

5. Keeping up with customers

6. Keeping up with competitors

Economies of scale: Savings from buying parts and materials, manufacturing, or marketing in large quantities.

Balance of trade: Total value of the products a nation exports minus the total value of the products it imports, over some period of time.

Trade surplus: A favorable trade balance created when a country exports more than it imports.

Trade deficit: An unfavorable trade balance created when a country imports more than it exports.

Balance of payments: The sum of all payments one country receives from another country minus the sum of all payments it makes to other countries, over some given period of time.

The balance of payments includes the balance of trade, plus the net dollars received and spent on foreign investment, military expenditures, tourism, foreign aid, and other international transactions.

• Two key measurements of a nation's level of international trade are the balance of trade and the balance of payments.

Foreign Exchange Rate Currency Valuation

Foreign exchange: The conversion of one currency into an equivalent amount of another currency.

Exchange rate: The rate at which the money of one country is traded for the money of another.

A currency can be strong or weak.

Floating exchange rate system: a currency's value or price fluctuates in response to the forces of global supply and demand. The supply and demand of a country's currency are determined in part by what is happening in the country's own economy.

Free trade: International trade unencumbered by restrictive measures.
It has positive and negative connotations (competition, health, safety...). It produces winners and losers, but the winners gain more than the losers lose, so the net effect is positive.

Government Intervention in International Trade

Protectionism: Government policies aimed at shielding a country's industries from foreign competition.

When a government believes that free trade is not in the best interests, it can intervene in several ways:

• !!! Tariffs: Taxes levied on imports

• Import quotas: Limits placed on the quantity of imports a nation will allow for a specific product.

• Embargo: A total ban on trade with a particular nation (a sanction) or of a particular product.

• Restrictive import standards: requiring special licenses for doing certain kinds of business and then making it difficult or expensive for foreign companies to obtain such licenses.

• Export subsidies: Financial assistance in which producers receive enough money from the government to allow them to lower their prices in order to compete more effectively in the global market.

• Antidumping measures: !!! dumping: Charging less than the actual cost or less than the home-country price for goods sold in other countries.

• Sanctions: embargoes (total or partial) that revoke a country's normal trade relations status (often as alternative to war).

Major organizations in international trade

The world Trade Organization (WTO): Permanent forum for negotiating, implementing, and monitoring international trade and for mediating trade disputes among the 160 member countries.

The International Monetary Fund (IMF): Monitors global financial developments, provides technical advice and training, provides short-term loans to countries that are unable to meet their financial obligations, and work to alleviate poverty in developing economies. 188 member countries.

World Bank: UN Agency involved in funding hundreds of projects around the world aimed at addressing poverty, health and education in developing countries.

Trading blocks

Trading blocs: Organizations of nations that remove barriers to trade among their members and that establish uniform barriers to trade with non-members nations. (Exp. NAFTA, EU, ASEAN, UNASUR, GAFTA)

European union: 27 countries that have eliminated hundreds of local regulations, variations in product standards, and protectionist measures that once limited trade among member countries. Many members implemented the EURO.

Asia-Pacific Economic Cooperation (APEC): 21 countries working to liberalize trade in the Pacific Rim, 40% world population, long-term goal of encouraging trade and investment among member countries and helping the region achieve sustainable economic growth.

USMCA Agreement (Former NAFTA): U.S., Canada and Mexico: free flow of goods/services/capital

AfCFTA: certain African countries.

Forms of international business activity

Importing: Purchasing goods or services from another country and bringing them into one's own country.

Exporting: Selling and shipping goods or services to another country.

International Licensing: Agreement to produce and market another company's product in exchange for a royalty or fee.

International Franchising: Selling the right to use a business system, including brand names, business processes, trade secrets, and other assets.

International Strategic Alliances and JVs: long-term partnerships between two or more companies to jointly develop, produce, or sell products.

!!! Foreign direct investment (FDI): Investment of money by foreign companies in domestic business enterprises.

Multinational corporations (MNCs): Companies with operations in more than one country.

Cultural and legal differences in the global business environment.

Culture: A shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior.

Ethnocentrism: Judging all other groups according to the standards, behaviors, and customs of one's own group.

Stereotyping: Assigning a wide range of generalized and often false attributes to an individual based on his or her membership in a particular culture or social group.

Cultural pluralism: The practice of accepting multiple cultures on their own terms.

Tax haven: A country whose favorable banking laws and low tax rates give companies the opportunity to shield some of their income from higher tax rates in their home countries or other countries where they do business.

Strategic choices when considering international markets.

Strategic approaches to international markets

!!! Multidomestic strategy: A decentralized approach to international expansion in which a company creates highly independent operating units in each new country.

Global strategy: A highly centralized approach to international expansion, with headquarters in the home country making all major decisions.

Transnational strategy (also known as “Glocal” (Global local): A hybrid approach that attempts to reap the benefits of international scale while being responsive to local market dynamics.

Designing international expansion in terms of …

Products: Which fits the destination market? Should we Customize them?

Customer Support: How to deal with technical assistance, installation or post sales?

Promotion Campaign: Standardization or customization?

Pricing: Should we adapt to every market? Standard?

Staffing: Expats? Locals? A mix of both?

Session 4 (Asynchronous “Management History Module”)

Early management: In 1776, Adam Smith published The Wealth of Nations, in which he argued the economic advantages that organizations and society would gain from the division of labor (or job specialization)—that is, breaking down jobs into narrow and repetitive tasks.

Industrial revolution: A period during the late eighteenth century when machine power was substituted for human power, making it more economical to manufacture goods in factories than at home.

4 management theory: classical, behavioral, quantitative, and contemporary.
Each of the four approaches contributes to our overall understanding of management, but each also a limited view of what it is and how to best practice it.

Classical approach

First studies of management, which emphasized rationality and making organizations and workers as efficient as possible. Two major theories compose the classical approach: scientific management (Frederick W. Taylor, the husband-wife team of Frank and Lillian Gilbreth), and the general administrative theory.

Scientific management: An approach that involves using the scientific method to find the “one best way” for a job to be done.

Therbligs: A classification scheme for labeling basic hand motions.

General administrative theory: An approach to management that focuses on describing what managers do and what constitutes good management practice. They use general administrative theory when they perform the functions of management and structure their organizations so that resources are used efficiently and effectively.

Principles of management: Fundamental rules of management that could be applied in all organizational situations and taught in schools.

Henri Fayol’s described the five functions that managers perform (planning, organizing, commanding, coordinating, and controlling) and 14 principles of Management.

Bureaucracy: A form of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships.

Characteristics of Weber’s Bureaucracy:

Behavioral Approach

Organizational behavior (OB): The study of the actions of people at work.

The early OB advocates (Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester Barnard) contributed various ideas, but all believed that people were the most important asset of the organization and should be managed accordingly.

Hawthorne Studies: A series of studies during the 1920s and 1930s that provided new insights into individual and group behavior.

Elton Mayo: people’s behavior is largely impacted by group factors and standards.

Quantitative approach

Quantitative Approach (management science): The use of quantitative techniques to improve decision making. It involves applying statistics, optimization models, information models, computer simulations, and other quantitative techniques to management activities. Linear programming, for instance, is a technique that managers use to improve resource allocation decisions.

Total quality management (TQM): A philosophy of management that is driven by continuous improvement and responsiveness to customer needs and expectations.

Contemporary approach

System: A set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

Closed system: System that are not influenced by and do not interact with their environment.

Open system: Systems that interact with their environment.

Contingency approach (situational approach): A management approach that recognizes organizations as different, which means they face different situations (contingencies) and require different ways of managing. If … then we do …

Session 5

Chapter 5: Forms of Business Ownership

Ownership Models

Ownership: propriété

Owner: propriétaire

Liability: responsabilité

Sole Proprietorships

Sole proprietorship: A business owned by a single person (may have employees) / The person and the business are the same person.

Unlimited liability: A legal condition under which any damages or debts incurred by a business are the owner’s personal responsibility.

Advantages of Sole Proprietorships

• Simplicity – easy and cheap process of creation

• Single layer of taxation – Easy process

• Privacy–no need to report on the business.

• Flexibility and control - You own the place!

• Fewer limitations on personal income–All the business makes (after tax) is yours!

• Personal satisfaction – You are your boss!

Disadvantages of Sole Proprietorships

• Financial liability

• Very demanding on the owner

• Limited managerial perspective

• Resource limitations

• No employee benefits for the owner

• Finite life span

Partnerships

Partnership: an unincorporated company owned by two or more people.

A partnership can be general or limited.

General Partnership: A partnership in which all partners have joint authority to make decisions for the firm and joint liability for the firm’s financial obligations.

Limited Partnership: A partnership in which one or more persons act as general partners, run the business, and have the same unlimited liability as sole proprietors. The remaining owners are limited partners who do not participate in running the business and who have limited liability (limited to their contribution).

Limited liability: A legal condition in which the maximum amount each owner is liable for is equal to whatever amount each invested in the business.

Advantages of Partnerships:

• Simplicity

• Single layer of taxation

• More resources than with sole proprietorship

• Cost sharing

• Broader skill and experience base

• Longevity

Disadvantages of Partnerships

• Unlimited liability

• Potential for conflict

• Expansion, succession, and termination issues

Partnership Agreement: Document that reflects investment percentages, profit- sharing percentages, management responsibilities and other expectations of each owner, decision-making strategies, succession and exit strategies, criteria for admitting new partners, and dispute-resolution procedures.

!!! Master limited partnership (MLP): A partnership that is allowed to raise money by selling units of ownership to the general public.

Limited liability partnership (LLP): A partnership in which each partner has unlimited liability only for his or her own actions and at least some degree of limited liability for the partnership as a whole.

Corporation

Corporation: A legal entity, distinct from any individual person, that has the power to own property and conduct business.

Shareholders: Investors who purchase shares of stock in a corporation.

Stakeholder: is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers.

!!! A shareholder is a Stakeholder, but a Stakeholder is not necessarily a Shareholder.

Private Corporation: A corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the public.

Public corporation: A corporation in which stock is sold to anyone who has the means to buy it.

Advantages of Corporations:

• Ability to raise capital.

• Liquidity: A measure of how easily and quickly an asset such as corporate stock can be converted into cash by selling it

• Longevity

• Limited liability

Disadvantages of Corporations:

• Cost and complexity

• Reporting requirements

• Managerial demands

• Possible loss of control

• Double taxation

• Short-term orientation of the stock market

!!! S corporation: A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership.

Benefit corporation: A profit-seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit.

!!! Limited liability company (LLC): Structure that combines limited liability with the pass-through taxation benefits of a partnership.
Number of shareholders is not restricted, nor is members’ participation in management.

Corporate Governance

Corporate Governance: Policies, procedures, relationships, and systems in place to oversee the successful and legal operation of the enterprise.
Also refers to the responsibilities and performance of the board of directors specifically.

Shareholders

Proxy (Attention vient souvent à l’exam): A document that authorizes another person to vote on behalf of a shareholder in a corporation.

Shareholder activism: Activities undertaken by shareholders to influence executive decision making in areas ranging from strategic planning to social responsibility.

Corporate Governance

Board of Directors: group of professionals elected by the shareholders as their representatives, with responsibility for the overall direction of the company and the selection of top executives. The Chairman oversees the Board of Directors.

Corporate Officers

Corporate officers: The top executives who run a corporation (hired by the Board of Directors):

Chief executive officer (CEO): The highest-ranking officer of a corporation. Other C levels: CFO, CTO, CHRO, CBDO, CMO...

Mergers and Acquisitions as growth strategy

Merger and acquisitions

Merger: Two companies combine and perform as a single entity.

Acquisition: One company buys a controlling interest in the voting stock of another company.

Hostile takeover: Acquisition of another company against the wishes of management.

!!! Leveraged Buyout (LBO): Acquisition of a company’s publicly traded stock, using funds that are primarily borrowed, using the acquired assets to pay back the loans used to acquire the company.

Advantages of Mergers and Acquisitions:

• Increase buying power as a result of their larger size (economies of scale)

• Increase revenue by cross-selling products to each other’s customers.

• Increase market share by combining product lines.

• Gain access to expertise, systems, and teams (synergies)

• Sometimes is the best or only way to grow in a mature market.

Disadvantages of Mergers and Acquisitions:

• Executives have to agree how the merger will be done.

• Managers need to agree who will be in charge.

• Difficulties blending product lines, branding strategies, and advertising and sales efforts.

• Difficulties blending cultures.

• Companies must often deal with layoffs.

Strategic Alliances and Joint Ventures

Strategic Alliance: Long-term partnership between companies to jointly develop, produce, or sell products.

Joint venture: A separate legal entity established by two or more companies to pursue shared business objectives.

Session 6

Chapter 6: Entrepreneurship and Small-Business Ownership

The Entrepreneurship Impact (Joan Roig, Mercadona):

• Without entrepreneurs there are no companies

• Without companies there is no employment

• Without employment there is no wealth

• Without wealth there is no social development

EU Entrepreneurship: Small and medium-sized enterprises (SMEs) are the backbone of Europe's economy. They represent 99% of all businesses in the EU. In the past five years, they have created around 85% of new jobs and provided two-thirds of the total private sector employment in the EU. The European Commission considers SMEs and entrepreneurship as key to ensuring economic growth, innovation, job creation, and social integration in the EU.

SME: 10-250 employees, 2-43 million € on the balance sheet.

Entrepreneurship:

• “Entrepreneurship is the pursuit of opportunity beyond resources controlled” (Harvard Business School)

• The capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit.

• The process by which either an individual or a team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation.

• Entrepreneurship identifies and exploits opportunities, handling situations of uncertainty and complexity.

• ‘Entrepreneurs are the crazy people who work 100 hours a week, so they don’t have to work 40 hours for someone else.’ Brad Sugars (Int’l Business Coach)

The Evolution of Entrepreneurship

Factors influencing the “new” entrepreneurship:

• Globalization: More markets, more competition

• IT: As a facilitator of the entrepreneurship process (one human and a laptop create a company)

• Knowledge: Has become the most important resource, above materials, location or other factors of production.

Roles of Small Businesses in the Economy

• They provide jobs.

• They introduce new products.

• They meet the needs of larger organizations.

• They inject a considerable amount of money into the economy.

• They take risks that larger companies sometimes avoid.

• They cover segments and niches that larger companies cannot afford to cover.

• They provide specialized goods and services.

Characteristics of Small Businesses:

• Most small firms have a narrow focus.

• Small businesses have to get by with limited resources.

• Small businesses often have more freedom to innovate.

• Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace.

Why People Start Their Own Companies:

• More control over their futures

• Tired of working for someone else

• Passion for new product ideas

• Pursue business goals that are important to them on a personal level.

• Inability to find attractive employment anywhere else.

Motivations of Spanish Entrepreneurs (M.I.T. Technology Review 2015): Entrepreneurs were asked to define SUCCESS:

• Self-Realization: Reach happiness through your professional activity.

• Purpose: Positive contribution to society through the project.

• Innovation: Creation of new products or services that will add value to society.

• Excellence: Outstanding performance that leads to reaching the objectives.

• Benefits: Revenues that will justify the long-term sustainability of the project.

Business Start-up Options:

1. Create a New Business

2. Buy an Existing Business

3. Buy into a Franchise System

Business plan: A document that summarizes a proposed business venture, its goals, and plans for achieving those goals.

Advisory board: A team of people with subject area expertise or vital contacts who help a business owner review plans and decisions.

Business incubators: Facilities that house small businesses and provide support services during the company’s early growth phases.

Business Start-Up Option:

Why new businesses Fail:

Financing Options for Small Businesses

Seed money: The first infusion of capital used to get a business started – (FFF and Angel Investors).

!!! Angel investors: Private individuals who invest money in start-ups, usually earlier in a business’s life and in smaller amounts than VCs are willing to invest, or banks are willing to lend.

Microlenders: Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans.

Crowdfunding: Soliciting project funds, business investment, or business loans from members of the public.

!!! Venture capitalists (VCs): Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit. Normally associated with companies in the growth stage that have obtained “market fit”.

Initial public offering (IPO): A corporation’s first offering of shares to the public.

Funding

Valuation: How much is the company worth.

• PreMoney: before the new investment is IN the company.

• PostMoney: after the new investment is IN the company.

• PostMoney = PreMoney + New Investment

!!! Dilution: Current shareholders see their Stake (%) go down as new investments arrive

• New Stake (%) = Old Stake x PreMoney/PostMoney

• 41,7% = 50% x 500.000/600.00

The Franchise Alternative

Franchise: A business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of the business system of another company (the franchisor).

Franchisee: A business owner who pays for the rights to sell the products and use the business system of a franchisor.

Franchisor: A company that licenses elements of its business system to other companies.

Advantages of Franchising:

• Combines some of the freedom of working for yourself with many of the advantages of being part of a larger, established organization.

• Name recognition, national advertising programs, standardized quality of goods and services, and a proven formula for success.

Disadvantages of Franchising:

• Agree to follow the business format.

• Little control over decisions the franchisor makes that affects the entire system.

• Don’t have the option of independently changing your business in response to market changes.

Session 7 (Asynchronous Goiko Grill)

Read all notes in a notebook.

Session 8

Chapter 7: Management Roles, Functions, and Skills

The importance of management, and the tree management roles.

Management: The process of planning, organizing, leading, and controlling to meet organizational goals.

Environmental analysis Tools:

Manager: Managers work in an always-changing environment of extreme complexity and uncertainty.

The 3 Roles of Management

Managerial roles: Behaviors and activities involved in carrying out the functions of management.

All managerial roles can be grouped in 3 categories:

1. Interpersonal roles

2. Informational roles

3. Decision making roles

Interpersonal roles: Providing leadership to employees, acting as a liaison between groups, networking, and fostering relationships.

Informational roles: Gathering information from inside and outside the organization, sharing information: The Executive Dashboard – Control board for managers.

Decisional roles: Facing an endless stream of decisions, some which need to

be made on the spot (decisions lead to ACTION)

There is a tendency of pushing down decision-making to lower layers of the organization.

The Management Functions

The 4 Functions of Management:

1. Planning: Objective: “what do we want to achieve”

2. Organizing: Means and Tasks: “Who, and How, does What?”

3. Leading: Execution/Motivation: “making things happen”

4. Controlling: Check: “Are we on the right track?”

The Planning Function

Planning: Establishing objectives and goals for an organization and determining the best ways to accomplish them. Planning: analyzing the environment + developing strategies.

Strategic plans: Plans that establish the actions and the resource allocation required to accomplish strategic goals. Defined for periods of two to five years and developed by top managers.

The Strategic Planning Process

Defining the Mission, Vision, and Values

Mission statement: A brief statement of why an organization exists; in other words, what the organization aims to accomplish for customers, investors, and other stakeholders.

Explains the reason of being, defines the soul of the organization, why we are here.

Vision statement: An inspirational expression of what a company aspires to be.

Where do we want to get?

Values statement: An articulation of the principles that guide a company’s decisions and behaviors.

SWOT Analysis

What’s wrong with SWOT?

A two-way classification of forces in INTERNAL and EXTERNAL is stronger than the four-way of the SWOT analysis.

Because classification of factors in S W O and T can be arbitrary

Conclusion: Circumstances influence the classification!! (Environment influences the strategy)

Developing Forecasts

Forecasts (=prévision): predictions about the future (what will happen, when will happen and how will happen)

Quantitative forecasts: Typically based on historical data or tests and often involve complex statistical computations.

Qualitative forecasts: Based on intuitive judgments.

Establishing Goals and Objectives:

Goal: A broad, long-range target or aim.

Objective: A specific, short-range target or aim.

SMART objectives: specific, measurable, attainable, relevant, time limited.

The Organizing Function

Organizing: The process of arranging resources to carry out the organization’s plans.

Management pyramid: An organizational structure divided into top, middle, and first-line management.

Top Managers: Highest level of the organization’s management hierarchy. Responsible for setting strategic goals; they have the most power and responsibility in the organization. They plan long-term goals.

Middle Managers: Those in the middle of the management hierarchy. They develop plans to implement the goals of top managers and coordinate the work of first-line managers. They plan mid-term objectives to meet the strategic long-term goals.

First-line managers: Those at the lowest level of the management hierarchy. They supervise the operating employees and implement the plans set at the higher management levels.

The Leading Function

Leading: Guiding and motivating people to work toward organizational goals. Leading is about MAKING THINGS HAPPEN.

Types of Intelligence present in Leaders

Cognitive intelligence: Involves reasoning, problem solving, memorization, and other rational skills.

Emotional intelligence: Measure of a person’s awareness of and ability to manage his or her own emotions.

Social intelligence: Looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own.

Leadership Styles

Autocratic leaders: Leaders who do not involve others in decision making.

Democratic leaders: Leaders who delegate authority and involve employees in decision making.

Laissez-faire leaders: Leaders who leave most decisions up to employees, particularly those concerning day-to-day matters.

Participative management: Associated to Democratic Leaders - A philosophy of allowing employees to take part in planning and decision making.

Employee empowerment: Associated to Laissez-Faire Leaders - Granting decision-making and problem-solving authorities to employees so they can act without getting approval from management.

Coaching and Mentoring

Coaching: Helping employees reach their highest potential by meeting with them, discussing problems that hinder their ability to work effectively, and offering suggestions and encouragement to overcome these problems.

Mentoring: A process in which experienced managers guide less- experienced colleagues in the nuances of office politics, serving as a role model for appropriate business behavior, and helping to negotiate the corporate structure.

Building a Positive Organizational Culture

Organizational culture: A set of shared values and norms that support the management system and that guide management and employee behavior.

Creating the Ideal Culture in Your Company:

The Controlling Function

Controlling: The process of measuring progress against goals and objectives, and correcting deviations if results are not as expected.

Establishing Performance Standards

Standards: Criteria against which performance is measured.

!!! Benchmarking: Collecting and comparing processes and performance data from other companies.

Quality: A measure of how closely a product conforms to predetermined standards and customer expectations

!!! Balanced scorecard: A method of monitoring the performance from four perspectives: finances, operations, customer relationships, and the growth and development of employees and intellectual property.

Crisis management: Procedures and systems for minimizing the harm that might result from some unusually threatening situations.

Types of managerial skills

Interpersonal skills: Skills required to understand other people and interact effectively with them.

Technical skills: The ability and knowledge to perform the mechanics of a particular job.

Administrative skills: Skills in information gathering, data analysis and other aspects of managerial work.

Conceptual skills: Ability to understand the relationship of parts to the whole.

Decision-making skills: Ability to identify a decision situation, analyze the problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results.

Session 9

‘The concept of strategy’ Grant, Contemporary Strategy Analysis.

Strategy

Strategy: Is the means by which individuals and organizations achieve their objectives.

“Strategy is about achieving success”. Without ACTION strategies are of little use.

The 4 factor that leads to success:

1. Goals that are consistent and long term

2. Deep understanding of the Environment

3. Resource Appraisal: evaluating the resources available.

4. Effective Implementation: action

• Internal and external factors linked by the strategy; analysis needs to be consistent.

!!! Strategic Fit: coordination and connection between external and internal environment.

!!! Internal Fit: Alignment of individual internal strategies with one another – Internal connection and coordination.

Activity System: (Michael Porter) “Strategy is the creation of a unique and differentiated position (competitive advantage) involving a different set of activities” (Value Chain)

Evolution of the View of Strategy

Evolution of Environment:

• More unstable

• More unpredictable

• More complex and turbulent

Consequences:

• Less detailed planning

• More guidelines

• More flexibility

• Higher importance for strategy

Strategy – Do firms need it?

Strategy helps management of organizations:

• As a decision support (reducing the decision options)

• Facilitating coordination between all parties involved

• Helping focus on the long-term goals – Strategy if forward looking.

Some Notes About Strategy

Distinguishing strategy from tactics:

• Strategy is the overall plan for deploying resources to establish a favorable position.

• Tactic is a scheme for a specific manoeuvre.

Characteristics of good strategic decisions:

They should be...

• Important

• Involve a significant commitment of resources.

• Not easily reversible

What is Real Strategy?

Premise: Strategy begins in the thoughts of the organizational leaders

Then, 2 levels of Strategy are resulting:

Intended Strategy: Mission, vision, values and competitive statement – Shows STATEMENT (willingness) and serves as communication means.

Real Strategy: Is realized as ACTION and it is, hence, OBSERVABLE.

Corporate and Business Strategy/ What are they?

Strategic Choices can be summarized in 2 questions:

1. Where to Compete?

Defines the Corporate Strategy- Broader Perspective

Responsibility of Top Management (C-level). Corporate Strategy defines the scope.

• Products we supply (what’s our business)

• Customers we serve.

• Places where we operate.

2. How to Compete?

Defines the Business Strategy- Specific Perspective

Responsibility of Senior Management (Middle

Management)

• What are our competitive advantages?

Business Strategy defines how to compete.

How Should Strategy be Created/Defined? Formal vs Informal Approach

How is Strategy Created?

Intended Strategy: Strategy as conceived by the leader.

Emergent Strategy: Interpretation of the intended strategy to adapt it to changing circumstances.

Realized Strategy: The actual strategy that is implemented (Normally 10%-30% of Intended)

Mintzberg’s Critique of Formal Strategic Planning

• The fallacy of prediction: The future is unknown.

• The fallacy of detachment: Impossible to divorce formulation from implementation.

• The fallacy of formalization: Impedes flexibility, spontaneity, intuition and learning.

Value Chain

Business is an exchange of value. The organization generates value by transforming lower value inputs into higher value outputs. Value is not created as a block; but as the addition of small pieces of value created in the chain of the different individual activities the organization performs.

These individual activities which add value, are known as "Key Activities". The set of these Key Activities is what we call “The Value Chain”.

By studying the different key activities and the value that they provide individually, we will be able to identify what activities create more value and differentiation (Competitive Advantage) in our offer; and which create less or none. This analysis will help us decide where we should put more effort and where we should put less.

Value Chain: The entire series of organizational work activities that add value at each step from raw material to finished products.

WHAT IS IT USED FOR? (value Chain)

To identify and analyze the COMPETITIVE ADVANTAGES of an organization in the INTERNAL ENVIRONMENT and EXTERNAL ENVIRONMENT (Industry Value Chain).

WHAT INFORMATION PROVIDES? (value Chain)

• What activities provide more or less value?

• What activities are more or less profitable?

• What activities are more or less costly?

• The balance between cost and value provided of an activity.

• What activity is best for us considering our Resources and Capabilities?

• What activity dominates the Chain?

• Other

HELPS US UNDERSTAND (value Chain):

• How Value is Produced

• How Value is Processed

• How Value is Distributed

• How Value is connected and transferred among the different Key Activities

• How much is value costing us?

Example: Tea= Preparation= Cup= Location= Service= Price

Competitive Advantage: The KEY to the success of a company:

• What makes the company unique and better than competitors?

• How we fight off our competition

• How we show our clients our superior value

• A distinctive edge

• Not a general “attribute that a company has as a whole”

• It emerges from the different individual KEY ACTIVITIES

• Should be Sustainable in time.

• Should be difficult to replicate.

Three Groups of Competitive Advantages:

• Being the CHEAPEST: Ryanair

• Being the BEST: Apple...

• Being UNIQUE: Monopolistic companies

Contingency Theory: There is no single best way of organizing or managing. The best way to design, manage and lead an organization depends upon circumstances.

Session 10

Chapter 8: Organization and Teamwork

Four major types of organization structures

Organization structure: A framework to divide responsibilities, ensure accountability, and distribute decision-making authority. A poorly designed structure can create enormous waste, confusion, and frustration for employees, suppliers, and customers.

Organization chart: Diagram that shows how employees/tasks are grouped and the lines of communication and authority. (The visual representation of the Organizational Structure).
The Organizational chart designs the organization for it to accomplish its goals and objectives (strategic Plan). The organization design must serve the strategy (not the opposite).

Formal Organization vs. Informal Organization

Organization Chart example:

Agile organization: A company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in the business environment. It has a strong response capacity.

3 Steps process to Define an Organization Structure

1. Identifying Core Competencies (vital activities for the business (those that create value and competitive advantages))

2. Identifying Job Responsibilities (aka. Division of Labor)

3. Defining the Chain of Command

I. Spam of Management/Control

II. Centralization vs. decentralization (delegation of authority)

Identifying Core Competencies

Core Competencies: Activities that a company considers central and vital to its business.
How do we generate value? Where are our competitive advantages?

Identifying Job Responsibilities (division of labor)

Division of Labor: The degree to which organizational tasks are broken down into separate jobs.

What is our level of specialization?

What advantages and disadvantages do each?

Defining the Chain of Command (Span of Control)

Chain of Command: Pathway for the flow of authority from one management level to the next.

Span of Management/Control: The number of people under one manager’s control

How many people report to a certain manager’s control?

Line organization: A chain of command system that establishes a clear line of authority flowing from the top down.

!!! Line-and-staff organization: An organization system that has a clear chain of command but that also includes functional groups of people who provide advice and specialized services.

Examples: PA to CEO; Technical consultant to Operations Manager; Market Analyst to Marketing Director...

Centralization VS Decentralization

Centralization: When decision-making authority is at the top of an organization, we say the organization is Centralized.

Decentralization: When there is delegation of decision-making authority to employees in lower-level positions, we say the organization is Decentralized

Organizing the Work Force (Departmentalization)

Organizing the Workforce

Departmentalization: Grouping people within an organization according to:

1. Functions (Marketing, Finance…)

2. Divisions (Product, geography…)

3. Matrix (both functions and divisions)

4. Network (partners, suppliers…)

Organizing the Workforce

Functional structure: Grouping workers according to the similarity in their skills, resource use, and expertise (Finance, marketing, Operations…)

Divisional structure: Grouping departments according to similarities in product (Coca- Cola), processes (Cemex), customers (Nokia), geography (Multinational companies).

Matrix Structure

!!! Matrix structure: Structure in which employees are assigned to both a functional group and a project team (thus using functional and divisional patterns simultaneously).

Do you know any Matrix-based companies?

Network Structure

Network structure: A structure in which individual companies (Normally partners and suppliers) are connected electronically to perform selected tasks for a small headquarters organization.

Also called virtual organization. Examples: EPC contractors, Software development company.

Advantages and disadvantages?

Session 11

Micro-Environment Analysis 5 Forces: Attractiveness of Industry 

5 forces: model to analyze industry:

• Buyers (bargaining power)

• Suppliers (bargaining power)

• Rivalry among competitors

• Substitutes (threat of substitution)

• New Entrants (threat of new entrants and existing entry/exit barriers)

Bargaining Power of Buyers

Premise: Buyers always try to reduce price

Their bargaining power will reduce our profitability IF:

• It buys a high percentage of total sales.

• It can threaten to buy from others.

• It can threaten to self-produce (Zara, Wall Mart, Mercadona)

Bargaining Power of Suppliers

Bargaining power of a supplier is high and will reduce our profitability IF:

• There are very few suppliers (Crude Oil)

• Its product is unique (De Beers diamonds)

• The cost of change to another supplier is high (Oracle) – It can threaten to integrate forward (M&A)

• If we are a small buyer

Threat of Substitutes

If there are many substitutes (not competing products) to our product, we cannot raise prices without losing sales (i.e., raw materials, commodities)

• If clients can change easily, prices (and profitability) will be low.

Threat of New Entrants

Entry Barriers reduce the threat of new entrants.

Examples of barriers of entry are:

• Economies of scale of established companies (Telecoms, Electrical Power Grids,)

• Very high entry costs (capital intensive: Oil refinery)

• Distribution channels well established protected (Coca-Cola distributors)

• Strong differentiation

Rivalry among Competitors

High Rivalry reduces profitability:

• If there are many companies in the industry

• If the market is not growing (% of market share wars) – If fixed costs are high: overproduction.

• If exit barriers are high (airlines)

• If little product differentiation

Summary and Conclusions

5 FORCES ANALYSIS (External Microenvironment)

CONCLUSIONS (answers MUST be supported)

• Is the market attractive?
  Is the market friendly? (Will we be welcomed?)

• Is there room for us?

Macroenvironment:

Analysis PESTEL:

• Political Environment (democracy, wars,)

• Economic Environment (crisis, growth,)

• Social/Demographic Environment (Aging,) – Technological Environment (Internet, biotech) – Legal Environment (Security, Taxation)

Political (Issues) Environment:

• Taxation (Basque Region, Ireland)

• Privatization/Nationalizations

• Environmental legislation

• Security (Argentina-Repsol)

• Public Investment-Infrastructure

• Stability governments

Economic Environment

• Interest rates and inflation

• Consumer confidence

• Economic cycle (growth or recession)

• Unemployment

• Gross and per-capita income

• Labor legislation and costs

Social Environment

• Demography (Japan vs China)

• Social values (marriage, one parent families,)

• Lifestyles (outdoor vs traditional,)

• Tastes and shopping behavior (Malls vs Shops)

• Education levels (Norway vs Sudan)

Technological Environment

• New products (mp3 vs cd; tablets, smartphones)

• Inventions (Hybrid cars)

• R+D spending

• Information Technology (skype vs phone)

• Technological transfers (mobile in Portugal leaps)

Environmental conscience:

• Climate change

• Natural resources

• Recycling regulation

• Energy sources

Legal environment:

• Labor laws (US vs Spain)

• Regulations (Financial market regulation, banking industry)

• Tax codes

Summary and Conclusions

PESTEL ANALYSIS (External MACRO Environment)

CONCLUSIONS (answers MUST be supported)

Is the global environment attractive in general terms?

Any medium-high risks to take into consideration
Will they interfere critically in our plans?
Is there a way to mitigate them?

Session 12

Chapter 8 part 2

Team or workgroup: six common forms of teams

Organizing in Team

Team: Unit of two or more people who share a mission and collective responsibility as they work together to achieve a goal. Teams generate synergies.

Types of Teams

The type of Team we select will depend on:

1. Organization’s Strategic Goals (Organizational

Strategy)

2. The specific objective for forming the team (the

objective will define the nature of the team)

Problem-solving team: Meets to find ways of improving quality, efficiency, and the work environment (problem resolution) – They normally have limited life span, they disappear as the problem is resolved.

Self-managed team: Members are responsible for an entire process or operation (requires minimal supervision).

Fully self-managed teams select their own members.

Functional team (aka Vertical Teams): Members come from a single functional department which is based on the organization’s vertical structure.

Cross-functional team (aka Horizontal Teams): Draws together employees from different functional areas.

Task force (short –Term): Team of people from several departments who are temporarily brought together to address a specific issue (e.g., Covid-19 crisis team)

Committee (long-term): Team that may become a permanent part of the organization and is designed to deal with regularly recurring tasks (e.g., quality supervision committee)

Virtual Teams: Composed of members of different geographical locations. Little or none face to face interaction. Challenging but rewarding. (Very typical during project execution phase)

Advantages and/or disadvantages?

Advantages of Working on Teams:

• Higher quality decisions

• Increased diversity of views

• Increased commitment to solutions and changes

• Lower levels of stress and destructive internal competition

• Improved flexibility and responsiveness

Disadvantages of Working on Teams

• Inefficiency – Too much time to decide.

• Group thinking – Tendency to think the same.

• Diminished Individual Motivation – Diluted Motivation

• Structural Disruption inside the organization – Too much power given to the team.

• Excessive Workload – Team tasks in addition to existing individual tasks

Characteristics of Effective Teams:

• Clear sense of purpose

• Open and honest communication

• Open to Creative thinking (Open minded)

• Accountability to each other

• Focus

• Decision by consensus

Team Members Assume one of These Roles:

• “Dual-Role” are often the most effective team leaders.

What happens as the Team Develops?

Cohesiveness: How committed team members are to their team’s goals

Cohesiveness is reflected in meeting attendance, team interaction, work quality, and goal achievement.

Norms: Informal standards of conduct that guide team behavior

How we do things around here…

Team Conflict: Constructive vs. Destructive

Constructive conflict: Brings issues into the open, increases the involvement of team members, and generates creative ideas for solving a problem.

Destructive conflict: Diverts energy from more important issues, destroys the morale of teams or individual team members, or polarizes or divides the team.

Solutions to Team Conflict

Proactive attention: Deal with minor conflict before it becomes major conflict. (Don’t let problems grow large)

Communication: Get those directly involved in a conflict to participate in resolving it.

Openness: Get feelings out in the open before dealing with the main issues. (be open to people’s points of view)

Research: Seek factual reasons for a problem before seeking solutions. (find the origin of the problems to find a solution)

Flexibility: Don’t let anyone lock into a position before considering

other solutions.

Fair play: Insist on fair outcomes from members.

Alliance: Get opponents to fight together against an “outside force”

instead of against each other.

Managing an Unstructured Organization

Unstructured organization: It doesn’t have a conventional structure but instead assembles talent as needed from the open market; the virtual and networked organizational concepts taken to the extreme

Most services are outsourced and interconnected. Organizations are quickly formed and dissolved as

the company moves forward.

Benefits of Unstructured Organizations for Companies and Worker

Challenges of Unstructured Organizations

Session 14 (Asynchronous- Zappos Case)

Read doc word zappos.

Session 16

Chapter 17: Financial information and accounting concepts

Accounting

Accounting: Measuring, (organizing), interpreting, and communicating financial information to support internal and external decision making.

Financial accounting: Preparing financial information for users outside the organization.

Management accounting: Preparing data for use by managers within the organization.

Bookkeeping: recordkeeping: the clerical aspect of accounting.

Accounting is:

• Mandatory: legal and tax requirements

• Necessary: to understand the company’s health and make management decisions.

• Informative: to inform managers and stakeholders about the company’s performance.

Accounting is a language, it has:

• A dictionary: plan general contable (spain)

• Grammatical rules: accounting principles, GAAP (US)

Private accountants: In-house accountants employed by organizations and businesses other than a public accounting firm; also called corporate accountants.

Public accountants: Professionals who provide accounting services to other businesses and individuals for a fee.

Controller: The highest-ranking accountant in a company, responsible for overseeing all accounting functions.

Certified public accountants (CPAs): Professionally licensed accountants who meet certain requirements for education and experience and who pass a comprehensive examination.

Rules of accounting

GAAP (Generally Accepted Accounting Principles): Standards and practices used by publicly held corporations in the United States and a few other countries in the preparation of financial statements; on course to converge with IFRS.

International financial reporting standards (IFRS): Accounting standards and practices used in many countries outside the United States.

Audit: Formal evaluation of the fairness and reliability of a client’s financial statements.

External auditors: independent accounting firms that provide auditing services for public companies.

Sarbanes-Oxley: Informal name of comprehensive legislation designed to improve the integrity and accountability of financial information. This legislation was passed in the USA in2002 in the wake of several cases of massive accounting fraud (Enron, WorldCom...)

Assets: Any things of value owned or leased by a business.

Liabilities: Claims against a firm’s assets by creditors.

Owners’ equity: The portion of a company’s assets that belongs to the owners after obligations to all creditors have been met.

Accounting equation: assets – liabilities = owner’s equity

Double-entry bookkeeping and matching principle.

Double-Entry Bookkeeping: Method of recording financial transactions that requires a debit entry and credit entry for each transaction to ensure that the accounting equation is always kept in balance.

The Matching Principle: Expenses incurred in producing revenue must be deducted from the revenues they generate during the same accounting period.

Accrual basis: Accounting method in which revenue is recorded when a sale is made, and an expense is recorded when it is incurred: event focused.

Cash basis: Accounting method in which revenue is recorded when payment is received, and an expense is recorded when cash is paid Cash focused.

Depreciation: A procedure for systematically spreading the cost of a tangible asset over its estimated useful life. (an office, car, truck, table, computer...)

Amortization: A procedure for systematically spreading the cost of an intangible asset over its estimated useful life. (a patent, software, author rights...)

!!! Closing the books: Transferring net revenue and expense account balances to retained earnings for the period.

Fiscal year: any 12 consecutive months used as an accounting period (and be different from natural year).

Major financial statements.

3 basic documents:

• Balance sheet statement: statement of a firm’s financial position on a particular date.

• Income statement: Record of revenues and expenses, and profits-loss over a given period of time.

• Statement of cash flow: Cash receipts and cash payments. (Sources and Uses of cash)

Current assets: Cash and items that can be turned into cash within one year (Liquidity).

Fixed assets: Assets retained for long-term use: land, buildings, machinery, and equipment (property, plant, and equipment).

Current liabilities: Obligations that must be met within 1 year (Maturity).

Long-term liabilities: Obligations that fall due more than a year from the date of the balance sheet.

Retained earnings: The portion of shareholders’ equity earned by the company but not distributed to its owners in the form of dividends: net income – dividends.

Revenues: (units x selling price)

Expenses: Costs incurred in the process of generating revenues

Net income: Profit or loss incurred by a firm: Revenues – expenses.

Cost of goods sold: Cost of producing or acquiring a company’s products for sale during a given period.

!!! Gross profit (gross margin): Net sales minus the cost of goods sold.

Operating expenses: Costs of operation that except the cost of goods sold.

!!! EBITDA (Not a GAAP item): Earnings before interest, taxes, depreciation, and amortization.

Ratio analysis.

Ratios: Accounting ratio is the comparison of two or more financial data which are used for analyzing the financial statements of companies. Thay are metrics of performance. Ratios have no value on their own.

!!! Profitability ratios: analyses how well a company is conducting its ongoing operations. It shows the state of the company’s financial performance; its capacity to generate profit.

Example: return on sales, return on assets, earnings per share.

Return on sales: The ratio between net income after taxes and net sales; also known as the profit margin.

Return on equity: The ratio between net income after taxes and total owners’ equity.

!!! Earnings per share: A measure of a firm’s profitability for each share of outstanding stock, calculated by dividing net income after taxes by the average number of shares of common stock outstanding.

Liquidity ratios: they measure a firm’s ability to pay its short-term obligations.

Working capital: an important indicator of liquidity: current assets – current liabilities.

Activity ratios: activity ratios analyze how well a company is managing and making use of its assets. They measure financial efficiency.

Example: inventory turnover, accounts receivable turnover.

!!! Inventory turnover ratio: A measure of the time a company takes to turn its inventory into sales, calculated by dividing the cost of goods sold by the average value of inventory for a period.

!!! Accounts receivable turnover ratio: A measure of the time a company takes to turn its accounts receivable into cash, calculated by dividing sales by the average value of accounts receivable for a period.

Leverage (debt) ratios: a company’s ability to pay its long-term debts is reflected in its leverage ratios, also known as debt ratios.

Example: debt to equity ratio, debt to total assets.

Debt-to-equity ratio: A measure of the extent to which a business is financed by debt as opposed to invested capital, calculated by dividing the company’s total liabilities by owners’ equity.

Debt-to-assets ratio: A measure of a firm’s ability to carry long-term debt, calculated by dividing total liabilities by total assets.

Corporate Finance:

• How to get money to invest in a start-up

• Assigning funds to each part of the company(budgets)

• Dividends?

• How to finance company growth (re-invest profits, debt, new capital?)

Market Finance:

• Stock Markets

• Debt (bond) markets (corporate-sovereign bonds)

• Investment banks, Brokers

• Investment Funds, Pension Funds

Risk and return are intimately linked: higher risk provides higher “expected” returns.

Risk Premium: extra interest paid by bonds (debt issued by government or corporations).

Profit and Loss detects economic/operational problems (company is losing money, margins are low, too many expenses, high payroll, high COGS, detailed expenditures...)

Balance Sheet: detects financial problems of 2 kinds:

• Business / Activity: high current assets because client stake too long to pay (ie. account receivables), or excessive inventory (profits do not go to cash, they are trapped in current assets)

• Structural: a company is too leveraged (too much debt), or it distributes too much dividend, and its future is in danger.

Session 17

Chapter 18: Financial Management

Financial Management: Planning for a firm’s money needs and managing the allocation and spending of funds.

Risk/return trade-off: The balance of potential risks against potential rewards.

Financial Plan: Document that outlines the funds needed for a certain period of time, along with the sources and intended uses of those funds.

Sources of information which feed the financial plan:

• Corporate strategic plan: actions, goals and objectives)

• Company’s financial statements: financial situation, historic

• External financial environment : debt prices, economy

Working capital: it determines the company’s immediate liquidity.
WC= Current assets – Current liabilities

• If Negative: Trouble and potential Bankruptcy (not always)

• If Positive: Good sign of financial capacity to grow and invest.

Current Assets: Cash, Inventory, Accounts Receivable.

Current Liabilities: Short term debt and Accounts payable.

Accounts receivable: Amounts currently owed to “our” firm by others (e.g., Customers).

Accounts payable: Amounts that “our firm” currently owes to others (e.g., Suppliers).

The budgeting processes.

Budget: A planning and control tool that reflects expected revenues, operating expenses, and cash receipts and outlays.

Financial control: Analyze and adjust the financial plan and budgets to correct for deviations from forecasted events (The Controller).

Budgeting challenges:

• Limited amount of money to spend.

• Revenues and costs are often difficult to predict.

• Not always clear how much should be spent.

Hedging: Protecting against cost increases with contracts that allow a company to buy supplies in the future at designated prices (e.g.: Airlines with fuel prices) (a way of bringing clarity and/or stability to our budget).

Zero-based budgeting: Each year budget starts from zero and must justify every item in the budget, rather than simply adjusting the previous year’s budget amounts (There is a hybrid approach where only a few departments (e.g.: advertising) do zero-budgeting)

Types of budgets:

• Start-up budget: Identifies the money that a new company will need to launch operations.

• Operating budget: Identifies all sources of revenue and coordinates the spending of those funds throughout the coming year.

• Capital budget: Outlines capital expenditures for real estate, new facilities, major equipment, and other capital investments.

• Project budget: Identifies the costs needed to accomplish a particular project, e.g.: conducting the research and development of a new product; opening a new market...

Capital investments: Money paid to acquire something of permanent value in a business.

Debt financing: Funding by borrowing money.

Equity financing: Funding by selling ownership shares in the company (publicly or privately).

Short-term financing: Used to cover current expenses (generally repaid within a year)

Long-term financing Used to cover long-term expenses such as assets (generally repaid over a period of more than one year)

Prime interest rates: the lowest rate of interest that banks charge for short-term loans to their most creditworthy customers

Discount Rate: The interest rate that Central Banks (Like the Federal reserve) charges on loans to commercial banks and other depository institutions.

• Interest rates are strongly related the level of quality risk and length risk.

Cost of Capital: The average rate of interest a firm pays on its combination of debt and equity. (Aka. WACC)

Leverage: The technique of increasing the rate of return on an investment by financing it with borrowed funds

Capital Structure firm’s mix of debt and equity financing.

Credit Cards: Very expensive credit, but sometimes useful

Trade credit: Credit obtained by a purchaser directly from supplier (In Spain is normal to pay at 90, 120 or 180 days)

Secured loans: Loans backed up with assets that the lender can claim in case of default, such as a piece of property.

Unsecured loans: Loans that require a good credit rating but no collateral. (Line of Credit is widely used)

!!! Line of credit: a financial institution makes money available for use at any time after the loan has been approved.

Compensating balance: some minimum amount of money that the bank requests to be put on deposit while the unsecured loan is outstanding.

Commercial paper: Short-term promissory notes, or contractual agreements, to repay a borrowed amount by a specified time (Maximum 270 days in the USA) with a specified interest rate.

Factoring: Selling the company’s accounts receivable to a third party. (Selling our invoices to third parties)

The 5 Cs lenders look at:

• Character (Objective and experience of the business): This aspect includes not only the personal and professional character of the company owners but also their experience and qualifications to run the type of business for which they plan to use the loan proceeds.

• Capacity (Capacity to repay): To judge the company’s capacity or ability to repay the loan, lenders scrutinize debt ratios, liquidity ratios, and other measures of financial health. For small businesses, the owners’ personal finances are also evaluated.

• Capital (Capitalization of the company): Lenders want to know how well capitalized the company is—that is, whether it has enough capital to succeed. For small-business loans in particular, lenders want to know how much money the owners themselves have already invested in the business.

• Conditions (Economic environment (Micro and Macro)): Lenders look at the overall condition of the economy as well as conditions within the applicant’s specific industry to determine whether they are comfortable with the business’s plans and capabilities.

• Collateral (Guarantees): Long-term loans are usually secured with collateral of some kind. Lenders expect to be repaid from the borrower’s cash flow, but in case that is inadequate, they look for assets that could be used to repay the loan, such as real estate equipment.

Lease: Agreement to use an asset in exchange for regular payment (during a specified period) (similar to rent but specified amount of time)

Bonds: A method of funding in which the issuer (normally a company) borrows from an investor and provides a written promise to make regular interest payments and repay the borrowed amount in the future

Secured bonds: Bonds backed by specific assets that will be given to bondholders if the borrowed amount is not repaid.

Debentures: Corporate bonds backed only by the reputation of the issuer

Convertible bonds: Corporate bonds that can be exchanged at the owner’s discretion into a certain number of shares of common stock of the issuing company.

Private equity: Ownership of assets (shares) that aren’t publicly traded (Selling/Purchasing Shares of/from non-public companies)

Venture Capitalism: a form of Private Equity in early stages of the life of the company

Public Stock Offerings

IPO: Initial Public Offering

• Preparing the IPO: (Legal experts, Auditing firm, Investment bank (underwriter))

• Registering the IPO: (Stock market regulator, e.g., SEC in the U.S.)

• Selling the IPO: Institutional investors, Investment bank (underwriter), general investors

!!! Underwriter (Bank Preparing the IPO) A specialized type of bank that buys the shares from the company preparing an IPO and sells them to investors.

!!! Prospectus SEC (CNMV in Spain): required document that discloses required information about the company, its finances, and its plans for using the money it hopes to raise.

Chapter 19: Financial market and investment strategies.

Financial markets

Stock exchanges: Organizations that facilitate the buying and selling of stock.

Bond market: Collective buying and selling of bonds. Most bond trading is done over the counter, rather than in organized exchanges.

Money market: An over-the-counter marketplace for short-term debt instruments such as Treasury bills and commercial paper

Derivatives market: A market that includes exchange trading (for futures and some options) and over the counter trading.

Over the counter: Trading through brokers and dealers, not through centralized exchange

Investment strategies

Establishing Investment Objectives:

• Why do you want to get more money?

• How much will you need – and when?

• How much can you invest?

• How much risk are you willing to accept?

• How much liquidity do you need?

• What are the tax consequences?

Bull Market: Market situation in which most stocks are increasing in value.

Bear Market: Market situation in which most stocks are decreasing in value.

Investment Portfolio: Collections of various types of investments

Asset allocation: Management of a portfolio to balance potential returns with an acceptable level of risk.

Broker: Certified expert who is legally registered to buy and sell securities on behalf of individual and institutional investors.

Market Order: Type of securities order that instructs the broker to buy or sell at the best price that can be negotiated at the moment.

Limit order: Stipulates the highest or lowest price at which the customer is willing to trade securities.

Stop order: An order to sell a stock when its price falls to a particular point, to limit an investor’s losses.

Short Selling: stock borrowed from a broker with the intention of buying it back later at a lower price, repaying the broker and keeping the profit.

Margin trading: Borrowing money from brokers to buy stock, paying interest on the borrowed money, and leaving the stock with the broker as collateral.

Session 19

Chapter 11: Human Resources Management

Staffing challenges

Human Resources (HR) Management: The specialized function of planning how to: Obtain employees, oversee their training, evaluate them, and compensate them.

(Also retaining existing employees and developing corporate HR branding)

Staffing challenges:

• Aligning the workforce (with organizational needs)

• Fostering employee loyalty

• Monitoring workloads and avoiding employee burnout

• Managing work–life balance

• Remote working

Work–life balance: Efforts to help employees balance the competing demands of their personal and professional lives.

Quality of work life (QWL): An overall environment that results from job and work conditions.

Evaluating Job requirements

Job description (describes the position): A statement of the tasks involved in a given job and the conditions under which the holder of a job will work.

Job specification (requirements): A statement describing the kind of person who would be best for a given job—including the skills, education, and previous experience that the job requires.

Forecasting Supply and Demand

• How many employees will we need at different times?

• Are they available inside the organization?

• Are they available outside the organization?

• How many employees are entering and leaving the organization? (turnover rate)

• What is the age of our employees? (retirement)

• Who are the critical employees for the organization?

Turnover rate: Percentage of the workforce that leaves every year.

Employee retention: Efforts to keep current employees.

Succession planning: Workforce planning efforts that identify possible replacements for specific employees, usually senior executives (Especially important for key employees or critical company positions)

Contingent employees: Non-permanent employees, including temporary workers, independent contractors, and full-time employees hired on a temporary basis.

Alternative work arrangements:

• Flextime

• Telecommuting

• Job sharing

• Job limitation

Managing diversity

Diversity: characteristics and experiences that define each of us as individuals. Includes race, age, gender, parental status, marital status, thinking style…

Sexism: Discrimination on the basis of gender

Glass ceiling: invisible barrier that can be attributed to subtle discrimination keeping women and minorities out of the top positions in business.

Sexual harassment: Unwelcome sexual advances, request for sexual favors, or other verbal or physical conduct of a sexual nature within the workplace.

Diversity and inclusion initiatives: Programs and policies that help companies support diverse workforces and markets.

Managing the employment life cycle

Recruiting The process of attracting appropriate applicants for an organization’s jobs.

Steps of recruiting:

• Assemble candidate pool

• Screen candidates

• Interview candidates

• Compare candidates

• Investigate candidates

• Make an offer

Termination The process of getting rid of an employee by firing her/him.

Layoffs Termination of employees for economic or business reasons.

Worker buyouts (incentives to leave) Distributions of financial incentives to employees who voluntarily depart; usually undertaken in order to reduce the payroll.

Mandatory retirement (age limitation) Required dismissal of an employee who reaches a certain age. Usual in military, firefighting, etc.

How to develop and evaluate employees

Performance review/appraisals (evaluations) Periodic evaluations of employees’ work according to specific criteria.

Electronic performance monitoring (EPM) Real-time, computer-based evaluation of employee performance.

360-degree review A multidimensional review in which a person is given feedback from subordinates, peers, superiors, and possibly outside stakeholders such as customers and business partners.

Orientation programs Sessions or procedures for acclimating new employees to the organization (Specific skills, organizational culture…)

Onboarding: Programs to help new employees get comfortable and productive in their assigned roles.

Skills inventory A list of the skills a company needs from its workforce, along with the specific skills that the individual employees currently possess (what we need vs. what we really have)

Employee compensation

Compensation: Money, benefits, and services paid to employees for their work.

• Salary: Fixed monetary compensation for work, usually by a yearly amount; independent of the number of hours worked

• Wages: Variable monetary payment based on the number of hours an employee has worked or the number of units an employee has produced

Bonus A cash payment, in addition to regular wage or salary, that serves as a reward for achievement.

Commissions Employee compensation based on a percentage of sales made.

Profit sharing: The distribution of a portion of the company’s profits to employees.

Gain sharing Tying rewards to profits or cost savings achieved by meeting specific goals.

Pay for performance: An incentive program that rewards employees for meeting specific, individual goals.

Knowledge-based pay: Pay tied to an employee’s acquisition of knowledge or skills – Also called competency-based pay or skill-based pay

Employee benefits and services

Total Labor Costs: Total Employee Company Annual Costs including Salaries in Kind.

Employee benefits: Compensation other than wages, salaries, and incentive programs (car, life insurance, lunch checks…)

Cafeteria plans: Flexible benefit programs that let employees personalize their benefits packages (building your own benefit plan)

Example of employee benefits:

• Paid vacations and sick leave

• Family and medical leave

• Child-care assistance

• Elder-care assistance

• Tuition loans and reimbursements

• Employee assistance programs

Retirement plans Company-sponsored programs for providing retirees with income.

Pension plans: Generally refers to traditional, defined-benefit retirement plans.

401(k) plan A defined-contribution retirement plan in which employers often match the amount employees invest USA ONLY

Employee stock-ownership plan (ESOP) A program that enables employees to become partial owners of a company.

Stock options A contract that allows the holder to purchase or sell a certain number of shares of a particular stock at a given price by a certain date.

Employee assistance program (EAP) A company-sponsored counseling or referral plan for employees with personal problems.

The role of Labor Unions

Labor relations: The relationship between organized labor and management (in its role as the representative of company ownership).

Labor unions: Organizations that represent employees in negotiations with management.

Seniority: The length of time someone has worked for his or her current employer, relative to other employees.

Work rules: A common element of labor contracts that specifies such things as the tasks certain employees are required to do or are forbidden to do.

Digital Enterprise: workforce analytics

Workforce analytics: people analytics: The application of big data and analytics to workforce management

Session 20

Chapter 10: Employee Motivation

Define motivation

Motivation The combination of forces that drive individuals to take certain actions and avoid other actions. Why do we care about motivation? Motivation creates engagement.

Indicators of motivation: engaged, satisfied, committed, rooted.

Engagement An employee’s rational and emotional commitment to his or her work (Being “into it”)

Drivers to motivation:

• The drive to acquire: Fulfilling the need of physical and emotional goods (such as recognition). (When we know that the job or task will help us fulfill those physical and emotional needs, we will feel more motivated)

• The drive to bond – Feeling connected. Feeling part of something larger (When we understand the importance of our task as part of a larger purpose, we will feel more motivated)

• The drive to comprehend – Learning, understanding, facing challenges, making sense of the world around us (When we know we will improve ourselves and gain understanding)

• The drive to defend - An instinct to protect and a sense of justice (When we sense justice and fairness, we will feel more motivated)

Classical motivation theories

Taylors - Scientific Management

A management approach designed to improve employees’ efficiency by scientifically studying their work processes to obtain better methods. It is a continuous improvement methodology. It uses financial incentives as motivator.

Problem: It cannot explain why people are motivated by other reasons than money.

Hawthorne Studies and Effect

The “Hawthorne Effect” A supposed effect of organizational research, in which employees change their behavior because they are being studied and given special treatment. If we know we are being supervised, our performance increases.

Maslow

Maslow’s Hierarchy of Needs A model in which human needs are arranged in order of their priority, with the most basic needs at the bottom and the more advanced needs toward the top.

• We cannot move to a higher level until the lower ones have been fulfilled

• Once a need is fulfilled a new superior need arises

• Needs at the top of the pyramid have to be satisfied for motivation to occur

Mc. Gregor – X & Y

Theories about Management Thinking:

Theory X Oriented Management Assumption from management that employees are irresponsible, are unambitious, and dislike work and that managers must use force, strict control, or threats to motivate them (Can only be motivated by the fear of loosing their jobs or by extrinsic rewards (or hygiene factors) (those given by others, such as money and promotions))

Theory Y Oriented Management Assumption from management that employees enjoy meaningful work, are naturally committed to certain goals, are capable of creativity, and seek out (Can be motivated by working by objectives or by intrinsic rewards (or motivators) (those given by themselves, such as autonomy, mastery and purpose)

• Both theories are not opposite ends that need to be chosen. Key is balancing both theories to each situation.

Herzberg – 2 factors

Divided factors influencing motivation in 2 groups: satisfiers and dissatisfiers:

Intrinsic Factors: Factors such as achievement, personal growth, acknowledgment, responsibility, self management, meaning, are strong motivators and generate satisfaction: Motivational factors, Satisfiers.

Extrinsic Factors: Factors such as salary, job promotions, security, do not motivate, but can if absent create dissatisfaction. Hygiene factors, Dissatisfiers.

Mc Clelland’s – 3 needs

Need For Power – Controlling others

Need for Affiliation – Being accepted by others

Need for Achievement – Attaining personal goals

• Most of us have 1, 2 or 3 of these needs

• For business, we need to identify the needs of individuals to see where they fit best

Modern motivation theories

Expectancy Theory

Connects an employee’s efforts to his/her expectations about the outcome

The quantity and quality of effort people put in something, depends on their expectations about:

• Their own ability to perform

• Expectations about likely rewards

• The attractiveness of those rewards

Equity Theory

Employee motivation at work is driven largely by their sense of fairness.

Employees base their level of satisfaction on the perceived ratio of inputs to outputs or rewards they receive from it.

Process employees follow:

• Am I being recognized accordingly to my inputs?

• We balance inputs vs. outputs in the workplace

• Are they balanced? Are they fair?

• We compare our recognition to others. Is it similar?

Goal Setting Theory

A motivational theory suggesting that setting goals and objectives properly can be an effective way to motivate employees.

Criteria to be met by objectives:

• Goals should be specific enough to give employees clarity and focus.

• Goals should be difficult enough to inspire energetic and committed effort.

• There should be clear “ownership” of goals so that accountability can be established.

• Individuals should have belief in their ability to meet their goals.

• Timely feedback to let people know if they are progressing or not.

MBO

A motivational approach in which managers and employees work together to structure personal goals and objectives for every individual, department and project, to mesh with the organization’s goals. It’s a collaborative goal-setting process.

• Setting goals

• Planning action

• Implementing plans

• Reviewing performance

Job Characteristic Model

Redesigning Jobs to Stimulate Performance.

A model suggesting that five core job dimensions influence three critical psychological states that determine motivation, performance, and other outcomes.

Dimensions: 1. Skill (or talents) Variety 2. Task Identity (own responsibility) 3. Task Significance (impact on others) 4. Autonomy 5. Feedback

Psychological States 1. Meaningfulness of the job 2. Responsibility for results 3. Awareness about the actual results – Impact they create.

Approaches to Modifying Core Job Dimensions:

• Job Enrichment Making jobs more challenging and interesting by expanding the range of skills required

• Job Enlargement Expanding the number (not the level) of task, giving workers a greater variety to do

• Cross-Training (Job Rotation) Training workers to perform multiple jobs and rotating them through these various jobs to combat boredom or burnout

Reinforcement Theory

Employees in the workplace, like people in all other aspects of life, tend to repeat behaviors that create positive outcomes for themselves and to avoid or abandon behaviors that bring negative outcomes

• Positive reinforcement Encourage desired behaviors by offering pleasant consequences for completing or repeating those behaviors. If you reward it, it will be repeated

• Negative reinforcement Encouraging the repetition of a particular behavior (desirable or not) by removing unpleasant consequences for the behavior. If you do not punish it, it will be repeated

Incentives: Monetary payments and other rewards of value used for positive reinforcement.

Managerial strategies that are vital to maintaining a motivated workforce

Motivational Strategies in the Real World

• Providing timely and frequent feedback

• Personalizing motivational efforts

• Gamification for healthy competition: Applying game principles such as scorekeeping to various business processes.

• Adapting to circumstances and special needs

• Tackling workplace problems/negativity before they have a chance to destroy moral

• Being inspirational leaders

Thriving in the Digital enterprise

Performance management systems: Systems that help companies establish goals for employees and track performance relative to those goals.

Session 21

Chapter 13: The art and science of marketing

Marketing definition

Marketing: The process of creating value for customers and building relationships with those customers in order to capture value back from them (Philip Kotler).

Key Words:

• Value (generation, communication, capture)

• Exchange of value

• Lasting relationships… (trust, loyalty, recurrence…)

• Multidirectional

• Customer Empowerment

Marketing questions:

• What do we sell: “products” , “places” , “attributes” , “ideas” , “experiences”… (description of the value created)

• To whom do we sell: market segment (ie: female students between 15 y 25; retired men in rural areas,...)

• How do we sell: distribution channels, sales channels

• Marketing is not a battle of products, it’s a battle of perceptions

Marketing Myopia: paying more attention to the products that we offer than to the benefits and experiences we create for our clients.

Marketing is also used by:

• Individuals

• Non-profit organizations

• Celebrities

• Politicians

• Places

• Everyone needs to market themselves!!

Place Marketing: Marketing efforts to attract people and organizations to a particular geographical area.

Example: visit the canary islands.

Cause-related Marketing: Identification and marketing of a social issue, cause, or idea to selected target markets.

Example: Save the Children.

The role of Marketing in Society

Marketing plays an important role in helping people satisfy their needs and wants and by helping organizations determine what to produce.

Needs: Differences between a person’s actual state and his or her ideal state; they provide the basic motivation for action (to make a purchase)

Example: I am hungry => I need food

Wants: Specific goods, services, experiences, or other entities that are desirable in light of a person’s experiences, culture, and personality.

Example: I need food => I want a sandwich

Exchange process (the exchange of value): The process of obtaining a desired object or service from another party by offering something of value in return.

Transaction: When the exchange actually occurs.

Utility: Any added attribute that increases the value that customers place on the product

• Marketers enhance the appeal of their goods and services by adding utility.

4 Utility Types:

• Form – Packed salad, integrated services...

• Time – Concorde, Fedex, fast food...

• Place – Hotel, convenience stores...

• Possession – Jewelry...

The Marketing Concept

Marketing Concept: An approach to general business management that stresses customer needs and wants, seeks long-term profitability (sustainability), and integrates marketing with other functional units within the organization.

Evolution towards the Marketing Concept:

• Traditional Marketing – Focused on Product Improvement

• Selling Concept – Nicer packaging, better communication…

• Marketing Concept – We co-work with our customers to create value.

Relationship Marketing: A focus on developing and maintaining long-term relationships with customers, suppliers, and distribution partners for mutual benefit.

Customer Loyalty (the main goal): The degree to which customers continue to buy from a particular retailer or buy the products of a particular manufacturer or service provider.

Challenges in Contemporary Marketing

1. Involving the customer in the marketing process – Keeping a close relationship with the customer as we grow (CRM, Social Networks)

2. Making data-driven decisions (Marketing research)

3. Conducting marketing activities with greater concern for ethics and etiquette

Involving the Customer

Customer Relationship Management (CRM): A type of information system that captures, organizes, and capitalizes on all the interactions that a company has with its customers (IT Sales and Mktg Solution. Helps us keep relationships with thousands of customers at the same time)

Social Commerce: The creation and sharing (through social networks) of product-related information among customers and potential customers (influencing our customers)

Making Data-Driven Decisions

Helps us optimize our marketing efforts by gaining a deeper understanding of the market.

Marketing research (aka. market intelligence): The collection and analysis of information for making marketing decisions. Observation, surveys, interviews, focus groups…

Marketing with Greater Concern for Ethics and Etiquette

Permission-based marketing: Firms first ask permission to deliver messages to an audience and then promise to restrict their communication efforts to those subject areas in which audience members have expressed interest.

Stealth marketing: The delivery of marketing messages to people who are not aware that they are being marketed to; these messages can be delivered by either acquaintances or strangers, depending on the technique.

Understanding Today’s Customers

Consumer Market: Individuals or households that buy goods and services for personal use. (B2C)

Organizational Market: Companies, government agencies, and other organizations that buy goods and services either to resell or to use in the creation of their own goods and services. (B2B)

Cognitive dissonance: Tension that exists when a person’s beliefs don’t match his or her behaviors.

Example: buyer’s remorse, when someone regrets a purchase immediately after making it

Purchase Influences:

• Culture

• Socioeconomic level

• Reference groups

• Situational factors

• Self-image

The Organizational Customer

Decision Process of the Organizational Customer:

• An emphasis on economic payback and other rational factors (profit oriented)

• A formal buying process (e.g. tender, certification...)

• Greater complexity in product usage (training, repair, maintenance...)

• The participation and influence of multiple people (complex decision-making process)

• Close relationships between buyers and sellers (trust is required in many cases)

The Strategic Marketing Planning Process:

• Examine current marketing situation

• Assess opportunities and set objectives

• Develop marketing strategy

Crafting a Marketing Strategy

Marketing Strategy: An overall plan for marketing a product or a service

Steps to Strategic Marketing:

1. Segmentation

2. Positioning strategy

3. Marketing mix

4. Branding (not in the chapter)

Market penetration: Selling more of a firm’s existing products in the markets it already serves.

Market development: Selling existing products to new markets.

Product development: Creating new products for a firm’s current markets.

Diversification: Creating new products for new markets.

Market share: A firm’s portion of the total sales in a market.

Segmentation

Market: A group of customers who need or want a particular product and have the money to buy it.

Market segmentation: The division of a diverse market into smaller, relatively homogeneous groups with similar needs, wants, and purchase behaviors (dividing the market in homogeneous groups)

The rational is that the individuals of each segment will respond in a similar way to our marketing efforts

Demographics: The study of statistical characteristics of a population (Age, marital status…)

Psychographics: Classification of customers on the basis of their motivations, interests, and lifestyles (they like traveling, they love art, gastronomy…).

Geographic Segmentation: Categorization of customers according to their geographical location (From Madrid, from China, from Europe…)

Behavioral segmentation: Categorization of customers according to their relationship with products or response to product characteristics (Loyalty level, benefits obtained, usage rates…)

Target markets: Specific customer groups or segments to whom a company wants to sell a particular product.

Four strategies for reaching target markets: Undifferentiated, differentiated, concentrated, and individualized.

Positioning

Positioning: Managing a business in a way designed to occupy a particular place in the minds of target customers.

• It is NOT what we want to be…..

• It is NOT what we think we are…

• It is NOT what our product or service does...

• It is what our clients think (feel) we are

• “ Marketing is not a battle of products, it is a battle of perceptions”

• We try to influence the perception customers have about our products or services

Positioning Strategy:

• Positive example: Mercedes-Benz new position from older traditional customers to younger customers

• Negative Example: Mercedes Vaneo as a cool & fun car

Marketing Mix

Product life cycle: Most Products undergo a product life cycle.

The four stages through which a product progresses are:

• Introduction

• Growth

• Maturity

• Decline

Marketing mix: The four key elements of marketing strategy: product, price, distribution, and customer communication.

Aka “The 4 Ps” (Product, Price, Promotion and Placement)

• The Marketing Mix is ALWAYS CHANGING (being adapted to the actual environment)

• Product (Strategy about the value and utility of the product) A bundle of value that satisfies a customer need or want

• Price (Pricing Strategy) Amount of money charged for a product or service

• Promotion (Communication Strategy) A variety of persuasive techniques used by companies to communicate with their target markets and the general public

• Distribution channels (Placement Strategy) Systems for moving goods and services from producers to customers (Aka market channels)

Branding

Brand: A name, term, sign, symbol, design, or combination of those used to identify the products of a firm and to differentiate them from competing products

What happens if you do not build your brand?

• Efforts and actions will not be recognized as yours by your customers

• No intangible value associated to your organization

• You will not impact with your marketing

• You will become a commodity

• Your profit will only be improved by your capacity to manage your costs

Brand equity (value): The value that a company has built up in a brand.

Example: Porsche brand is valued in 30 billion € (in 2020)

Brand loyalty: Degree to which customers continue to purchase a specific brand.

Brand names: The portion of brands that can be expressed orally, including letters, words, or numbers.

Brand marks: The portion of brands that cannot be expressed verbally. Logos, colors, fonts... Brand Name Selection (cont.)

Logo: Graphical and/or textual representation of a brand.

Trademarks: Brands that have been given legal protection so that their owners have exclusive rights to their use.

National brands: Brands owned by manufacturers and distributed nationally.

Private brands: Brands that carry the label of a retailer or a wholesaler rather than a manufacturer (aka: Private label)

Co-branding: A partnership between two or more companies to closely link their brand names together for a single product.

License: An agreement to produce and market another company’s product in exchange for a royalty or fee.

Brand managers: Managers who develop and implement the marketing strategies and programs for specific products or brands.

Product line: A series of related products offered by a firm (Related Products) (Category of Products)

Product mix (Portfolio): Complete portfolio of products that a company offers for sale:

• Width (Many product lines)

• Length (Many products per line)

• Depth (Many varieties of each product)

Family branding: Using a brand name on a variety of related products.

Brand extension: Applying a successful brand name to a new product category.

Session 22

Chapter 9: Production Systems

The Systems View of Business

System: An interconnected and coordinated set of elements and processes that converts inputs to desired outputs.

The set of processes to convert lower value inputs into higher value outputs.

Very similar to the Value Chain, but concentrated on maximizing the production process itself (not the value it generates

The Systems View From Point to Line to Circle:

• The importance of looking at the whole picture

As a key knowledge for a good manager:

• Encourage everyone to see the big picture

• Understand how individual systems really work and how they interact with each other

• Understand problems before you try to fix them

• Understand the potential impact of solutions before you implement them

• Don’t move problems around—solve them

• Understand how feedback works in the system

• Use mistakes as opportunities to learn and improve

Value Chains and Value Webs

Value chain: All the elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer (in-house value generators)

Value webs: (sometimes referred as: industry ecosystems) Multidimensional networks of suppliers and outsourcing partners (external value generators)

• Facilitates the creation of virtual companies / virtual manufacturers

Redefining Organizations to Gain Competitiveness

Outsourcing: Contracting out certain business functions or operations to other companies (functions that might not add value to our value chain or that we do not have the capacity to perform efficiently)

Offshoring: Transferring a part or all of a business function to a facility in another country (Low value added, logistic reasons, cost reasons, raw material sourcing…) (the opposite action would be called reshoring)

Supply Chain Management

Supply chain: Set of connected systems that coordinate the flow of goods and materials from suppliers all the way through to final customers.

Supply chain management (SCM): Business procedures, policies, and computer systems that integrate the various elements of the supply chain into a cohesive system.

It has become KEY in the achievement of efficiency and competitiveness in the increasingly complex supply chains (and supply webs)

Supply Chain Management is about:

• Managing risks – Understanding and mitigating risks. (Health and safety risks, quality risks, delays...)

• Managing relationships – Within the different parties (in the search of collaboration, transparency…)

• Managing trade-offs – between the parties

• Promoting sustainability – Long-term perspective on the impact caused. (Economic, pollution, waste, etc.)

Inventory: Goods and materials kept in stock for production or sale

Inventory control: Determining the right quantities of supplies and products to have on hand and tracking where those items are.

Inventory can become an important cost.

Procurement: Acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services.

Procurement Management of materials can be key for the long-term competitiveness of the company.

Production and Operations Management

Production and Operations Management: Overseeing all the activities involved in producing goods and services.

• For products: More related to factory + delivery processes

• For Services: Oversees the entire service + delivery process

Some issues handled by Operations Management:

• Facilities location and design (Layout)

• Forecasting and capacity planning

• Scheduling – defining the length and order of tasks

• Lean systems – Productivity efficiency and waste reduction

Productivity: The efficiency with which an organization can convert inputs to outputs.

Lean Systems: Systems (in manufacturing and other functional areas) that maximize productivity by reducing waste and delays.

Waste: Any deviation from the optimum

Productivity: Efficiency with which an organization can convert inputs to outputs

Productivity = Value of outputs/value of inputs

Just-in-time (JIT): Inventory management in which goods and materials are delivered throughout the production process right before they are needed

Core of the notion of Lean systems

Attributes of “Lean” producers:

• Use JIT to reduce inventory

• Develop strong ties with suppliers (Mercadona)

• Educate suppliers (on issues of quality, safety, RSC,..)

• Eliminate all activities that do not add value

• Train and develop their employees towards flexibility

• Lean Systems are strongly Customer focus

Mass production: Manufacturing identical goods or services, usually in large quantities

Customized production: Creation of a unique good or service for each customer

Mass customization: Part of the product is mass produced and the remaining features are customized for each buyer

• Design customized by orders: give to each consumer the product as they want it.

• Flexible manufacturing techniques

• Constant dialogue with clients. The key: learn their preferences and act upon them.

• Create close relation client-supplier: brand loyalty.

Choosing the location of production facilities is a complex decision that must consider such factors as:

• Land availability

• Construction type

• Availability of talent

• Taxes

• Energy available

• Living standards

• Transportation

• Proximity to customers and business partners...

Capacity: The volume of manufacturing or service capability that an organization can handle (in a certain period of time)

Capacity planning: Establishing the overall level of resources needed to meet customer demand.

Production and Operations Management:

• Scheduling – Deciding the order and duration of each task

• Capacity planning - Establishing the overall level of resources needed to meet customer demand

• Gantt chart - A special type of bar chart that shows the progress of all the tasks needed to complete a project

• PERT – Program Evaluation and Review Technique

• Critical Path - In a PERT network diagram, the sequence of operations that requires the longest time to complete Production and Operations Management

Gantt chart: A special type of bar chart that shows the progress of all the tasks need to complete a project.

Service delivery

Scalability: The potential to increase production by expanding or replicating its initial production capacity

Quality: The degree to which a product or process meets reasonable or agreed-on expectations

Quality control: Measuring quality against established standards after the good or service has been produced and weeding out any defective products.

Quality assurance: A more comprehensive approach of companywide policies, practices, and procedures to ensure that every product meets quality standards.

Statistical process control (SPC) The use of random sampling and tools such as control charts to monitor the production process.

Six Sigma: A rigorous quality management program that strives to eliminate deviations between the actual and desired performance of a business system.

ISO 9000 A globally recognized family of standards for quality management systems

Session 24

Premises of the case

• Jeff Bezos founded Amazon in 1994

• 1999 – Amazon launched ZShops – first online marketplace

• Internet buble – Amazon lost 80% of value

• 3 Amazon ideas:

  • Put customer first

  • Invent

  • Be patient

• 2005 – introduction of Prime • 2000 – Introduction of ebook (not successful).

• 2007 introduction of the 399,00 USD kindle – success.

• 2017 – Amazon had 83% market share on online books.

Amazon

• “Fire” smartphone released with no success.

• 2014 – Eco smart speaker and Alexia

• 2006 – AWS (Amazon Web Services) was opened to external partners.

• 2017 – AWS had 35% of the global market share and largest source of operating income for Amazon 2009 – Bought Zappos to learn about their customer focus.

• Then Twitch, then Body Labs

• 2017 – Amazon had a fulfillment node less than 20 miles away from 50% of the US population.

• Bought Kiva Robots

• 45.000 Kiva robots installed at Amazon. Order preparation time down from 65 to 15 minutes.

• 2017 – opening of 13 physical retail book stores.

• 2017 – Amazon enters retail Grocery

• 2017 – Bought Whole Foods (13,4 Billion USD)

Walmart

• “Buy it low, stack it and sell it cheap”

• Built its own distribution centers

• 11,5 times inventory turnover (Amazon 9,6 times)

• SKU – Stock Keeping Unit

• 2017 – 80% of sales through own distribution centers

• 2017 – 90% of US population at <10 miles from a Walmart store

• 1980s – Electronic Data Interchange (EDI)

• Walmart Stores, Sam’s Club, Supercenters…

• 2000 – Walmart.com is created

• 2004 – Keep growing with losses

• Walmart.com is seen as a support for the physical store.

• On-store free pick-up

• 2009 – creation of marketplace for other vendors

• 2012 – Pangaea Project – New cloud infrastructure is created to support transactions.

• 14 acquisitions to support e-commerce

• 2017 – built 22 fulfillment centers with 500.000 items

• 2016 – 3-day shipping

• 2017 – free 2 day shipping to respond to Amazon Prime

• 2017 –Walmart buys jet.com (marketplace experience)

• 2017 – Walmart buys Bonobos, Moosejaw and Hayneedle to gain category killers.

Customer Behavior

• 7-8% of online market share (from total retail sales).

• Average 82 supermarket visits per year and 62 online visits per year

• Important goods required a “showroom”

• Already utilized products were ideal for online purchase

• Repeated and frequent purchase were ideal for online. (e.g. diapers, office supplies, etc.)

• Age and income also influenced the willingness to pay extra for rapid delivery

• Place and time of delivery also influenced

• Price comparison /Price scanning and monitoring by competitors

• Cyberwar to block price bots scanning site, etc. Customer Behavior

• Last mile delivery (highest costs associated)

• Very hard to control inventory changes (positive and negative)

• Return costs were underestimated

• Up to 40% returns in fashion, for example (representing 3-4% of sales)

• Distribution centers (less products in pallets) vs. Fulfillment centers (much more products handled individually by hand or robots)

• Sort Facilities

• Physical Stores

• Pick-up Locations

Case Analysis and Discussion Points

Environmental Analysis

E-commerce vs. Brick-and-Mortar

• What are the Advantages and disadvantages of each model?

• From the customer perspective?

• From the company perspective?

• Difference between linear and platform models

Amazon Vs. Walmart

• SWOT analysis

• Value Chain

• key competitive advantages

• Segmentation and Positioning

• Brand image and reputation contribute

• Challenges faced by each company in the retail industry

• Customer experience

Value chains

Walmart

Amazon

Development Strategy

• Are they using a defensive strategy or offensive strategy (to step into each other’s markets?)?

• Technological Innovations

• Supply Chain Strategies: How will they have to change in the future to adapt to their strategies?

• Strategy Development: Market Expansion

Session 25

Voir notes tarsicio.

Session 26

Chapter 4: Business Ethics and Corporate Social Responsibility

Good ethics in contemporary business

Ethics: Principles and standards of moral behavior (accepted by society as right versus wrong) governing the conduct of a person or group. Ethics is not about obeying the law; it is beyond legal compliance.

Practicing good business ethics involves, at a minimum:

• Competing fairly and honestly (following the rules)

• Communicating truthfully (tell the truth) (always?)

• Being transparent (always?)

• Not causing harm to others (stakeholders) (Insider Trading)

Transparency: The degree to which affected parties can observe relevant aspects of transactions or decisions.

Insider Trading:(Unethical Behavior) Use of unpublicized information that an individual gains from the course of his or her job, to benefit from fluctuations in the stock market.

Factors Influencing Ethical Behavior:

• Cultural Differences: Globalization – What is ethical where?

• Knowledge (if it is correct or not): Active search of ethical issues is key. Not knowing does not exempt us.

• Organizational Behavior: Creating a culture of Ethics (that rewards good behavior)

  • Code of Ethics (Defines values and principles)

  • Whistle Blowing (We should facilitate it within the organization)

Code of Ethics: A written statement that sets forth the principles that guide an organization’s decisions.

Whistle-Blowing (Internal or External): Disclosure of information by a company insider that exposes illegal or unethical behavior by others within the organization.

Ethical lapse: A situation in which an individual or a group makes a decision that is morally wrong, illegal, or unethical.

Example: Deciding not to pay taxes or not declaring a faulty product.

Ethical dilemma: A situation in which more than one side of an issue can be supported with valid arguments, or when all solutions are unpleasant.

Example: Deciding to offshore operations

Dilemmas of balancing Profit and Ethics:

• Local employment vs. Low foreign production costs

• Ethics of subcontractors?

• Origin of raw materials?

• High marketing costs -> higher selling prices

• Manipulation through promotional campaigns

• High salaries in NGOs

• User data gathering and usage

• Short term profit seeking

• Accumulation of investment money (Investment Funds)

Conflicts of interest: Situations in which competing loyalties can lead to ethical lapses, such as when a business decision may be influenced by the potential for personal gain.

Corporate social responsibility (CSR), and differences between philanthropy and CSR

Corporate Social Responsibility (CSR): The notion that business has obligations to society beyond the pursuit of profits (and compliance with the law)

Philanthropy (How everything Started): The donation of money, time, goods, or services to charitable, humanitarian, or educational institutions

Strategic CSR (Next Step in the Evolution): Social contributions that are directly aligned with a company’s overall business strategy.

• Strategic CSR makes more sense than general philanthropy for several reasons:

• business and society are mutually dependent, choices that weaken one or the other will ultimately weaken both.

• investments that benefit the company are more likely to be sustained over time.

• making sizable investments in a few strategically focused areas will yield greater benefits to society than spreading smaller amounts of money around through generic philanthropy.

Nongovernmental organizations (NGOs): Nonprofit groups that provide charitable services or promote social and environmental causes.

They pressure corporations which they feel act unethically

Example: Greenpeace

Four perspectives on CSR

Natural environment, and sustainable development

Greenwashing: Publicity efforts that present companies as being environmentally friendly when their actions speak otherwise

Efforts to Preserve Resources and Reduce Pollution

Cap and Trade (Emission Trading Market): Environmental policy that gives companies some freedom in addressing the environmental impact of specified pollutants, by either reducing emissions to meet a designated cap or buying allowances to offset excess emissions.

Sustainable development (aka: Sustainability): Operating business in a manner that meets the needs of the present without compromising the ability of future generations to meet their own needs (Definition from the UN)

• long-term thinking: • Economically • Socially • Environmentally

• sustainable development goals UN

Consumer rights

Consumerism: A movement that pressures businesses to consider consumer needs and interests (positive connotation)

It is about being customer oriented in our actions

• Not to be mistaken with Materialism (negative)

Consumerism includes:

• The right to buy safe products

• To buy them safely

• The right to be informed

• The right to choose which products to buy

• The right to be heard

Identity theft: A crime in which thieves steal personal information and use it to take out loans and commit other types of fraud.

Responsibilities towards employees

Discrimination: In a social and economic sense, denial of opportunities to individuals on the basis of some characteristic that has no bearing on their ability to perform in a job.

Example: Low wages because of race, gender, age…

Affirmative action (aka: Positive Discrimination): Recruit and promote members of groups whose economic progress has been hindered through either legal barriers or established practices; not only race related (women, disabilities, age, religion...)

Example: a certain percentage of discriminated groups as part of the organization, leads to tax advantages