Business

Business To understand ourselves and others!

Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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2

What Is a Business? Non-Profit

For-Profit

Money Motive

Social Service

Ethical Conduct

Efficiency

Effectiveness Social Responsibility

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Categories of Business Characteristics of Goods Producing ProducingGoods Goods

Characteristics of Providing Services Providing Services Service •Intangible product

•Tangible product •Consistent product definition

•Inconsistent product definition

•Production usually separate from consumption

•Produced & consumed at same time •High customer interaction

•Low customer interaction

•Often unique •Often knowledge-based

Capital Intensive

Labor Intensive

•Frequently dispersed

•Can be resold •Reselling unusual •Can be inventoried •Difficult to inventory •Some aspects of quality measurable •Quality difficult to measure •Selling is distinct from production •Selling is part of service •Product is transportable •Provider, not product is transportable •Site of facility important for cost •Site of facility important for customer contact •Often easy to automate •Often difficult to automate •Revenue generated primarily from tangible product •Revenue generated primarily from intangible service. 20/01/10

4

Factors of Production Scarce Resources Human Resources

Capital

EntrepreneursKnowledge

Factors of Production

Natural Resources

Finance, Insurance

Manufacturing

Transportation, Utilities

Construction

Wholesale & retail trade

Mining Agriculture 20/01/10

Goods

Services

Banking, Entertainment Health care, Repairs Information

5

Business Stakeholders •Maintain

•Receive quality goods in a timely fashion at reasonable cost

•Receive

•Offer reliable products that consumers trust and value

Distributors, Wholesalers, Retailers

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Employees

fair pay for work

in safe, comfortable environment

Stockholders

Customers

Creditors Suppliers

•Receive a satisfactory return on investments •Realize appreciation in stock value over time

Business firm

•Purchasing goods from competitors •Boycotting companies whose products are unsatisfactory or whose policies are unacceptable

•Work

stable employment in firm

•Receive repayment of loans •Collect debts and interest

•Receive regular orders for goods •Be paid promptly for supplies delivered 6

Business Model  



is the mechanism by which a business intends to generate revenue and profits involves both strategy and implementation

is the totality of  

 

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How it will select its customers How it defines and differentiates its product offerings How it creates utility for its customers How it acquires and keeps customers



How it goes to the market  

  

promotion strategy distribution strategy

How it defines the tasks to be performed How it configures its resources How it captures profit

7

Growth Model

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Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Managing Human Resources Marketing Management Finance and Accounting Information System

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Business Management Process 

Planning   



Organizing     



Employee activities Facilities and equipment Decision making Supervision Resource distribution

Leading  



Develop strategies for success Set goals & objectives Develop action plans

Influencing people Motivating people

Controlling   

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Monitoring progress Resetting the course Correcting deviations

10

Strategic Planning 

Market standing



Innovation



Human resources



Financial resources



Physical resources



Productivity



Social responsibility



Financial performance

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1

3

5 

Clarity of Vision

Forecasting

Mission Statement

4

Competitive Analysis

6

Goals and Objectives

Strategy: The broad set of action plans to achieve company goals

2

  

Action Plans

Corporate Strategy Business Strategy Functional Strategy

11

Organizing  

President, CEO, VP



Make long-range plans Establish policies Represent the company 

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Controller, Marketing Manager, Sales Manager



Office Manager, Supervisor, Foreman, Department Head





 

Implement goals Make decisions Direct first-line managers Implement plans Oversee workers Assist middle managers

12

Leading 

Leadership Styles    



Continuum of Leader Behavior Manager Makes Decision

Leadership Functions

Manager Sells Decision

Coaching Managing Change Mentoring

Manager Presents Ideas

  



Autocratic Democratic Laissez-faire Contingency



Corporate Culture People People

Company Company Values Values

Boss-Centered

Authority of Managers

Manager Makes Tentative Decision Manager Presents Problem

Freedom for Workers

Manager Sets Decision Limits Employee Employee Performance Performance

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CommuniCommunication cation

Community Community Involvement Involvement

Employees Make Decision

Employee-Centered

13

Controlling 

Management Skills 

Interpersonal



Technical



Administrative



Conceptual



Political



Time management



Global management



Information and technology

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

The Control Cycle

14

Value Based Management Methods, Models and Theories Strategy Value Creation

Organization Valuation Communication - Leadership Management Decision Making Change - Culture Marketing

•Business simulation

•Activity based costing •BPR

•Competitive Advantage

•Balanced scorecard

•CMM

•7 Ps marketing mix

•Crisis management

•BCG matrix

•Emotional intelligence

•Change management •Brand asset valuator •Enterprise Architecture •Core competence •Corp. governance •Break-even point •Bricks and clicks •Human capital index •Core groups •Business intelligence •Culture change •Corporate peputation •Just-in-time •Cost-benefits •Expectancy theory •Earnings per share •Distinctive capability analysis •Leadership styles •Growth phases •EVA •Groupthink •Experience curve •PDSA/PDCA cycle •Hierarchy of needs •GAAP •Innovation adoption •Game Theory •Results-based curve •Learning org. •IRR leadership •Industry Life Cycle •Marketing Mix 4/5P's •Market value added •People CMM •Root cause analysis •MBO •PEST analysis •Result oriented •NPV •Seven surprises •Outsourcing management •Product/market grid •Operating cash flow •Six sigma •SWOT analysis •Seven habits •Profit pools •Theory X Theory Y •Theory of constraints •Payback period •System thinking •Theory of reasoned •ROI •TQM •Value chain action 20/01/10

•Brainstorming

15

Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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Traditional Strategy Development “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

10% ategy

Total Realized Strategy

Emergent Strategies

90% 20/01/10

(unintended strategies due to a learned pattern of behavior or unforeseen events)

yr ne H gr ebzt ni M

Realized Str

50%

Un St rea ra liz te ed gy

Fo St rm r a Pl ateg l an ni ic ng

Sun Tzu [Wu] (BC 535 - 228)

17

Strategic Management Model Environmental Scanning External Societal Environment General Forces Task Environment Industry Analysis

Internal Structure Chain of Command Culture Beliefs, Expectations, Values

Strategy Formulation

Strategy Implementation

Evaluation and Control and Control

Mission Reason for existence

Objectives What results to Strategies accomplish by when Plan to achieve the mission & objectives

Policies Broad Guidelines for decision making

Programs Activities needed to accomplish a plan

Resources Assets, Skills Competencies, Knowledge

Budgets Cost of the programs

Procedures Sequence of steps needed to do the job

Process to monitor performance and take corrective action

Performance

Feedback/Learning

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Strategic Decision Making

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Strategy Map

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Core Principles, Organizational Values and Corporate Culture •Core organizational values reflected in culture •Sensitivity to the needs of customers and employees •Interest in having employees generate new ideas •Willingness to take risks •The values placed on people •Openness of available communization options •Friendliness and congeniality of the employees toward one another

•Transmitting culture •Symbols: Objects that say more than meets the eye •Slogans: Phrases that capture organizational culture •Stories: “In the old days, we used to...” •Jargon: The special language that defines a culture •Ceremonies: Special events that commemorate corporate values •Statements of principle: Defining culture in writing

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Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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Operations as a Transformation Process 

Historical events in OM 









 

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Industrial revolution Scientific management Human relations Management science Quality revolution Globalization Information age/internet revolution 23

Operations as the Technical Core Finance/Accounting

Suppliers

Budgets Cost analysis Capital investments Stockholder requirements

Operations

Material availability Quality data Delivery schedules Designs

Personnel needs Skill sets Performance evaluations Job design/work measurement

Product/Service Availability Lead-time estimates Status of order Delivery schedules Sales forecasts Customer orders Customer feedback Promotions

Marketing

Production and Inventory data Capital budgeting requests Capacity expansion and Orders for materials Technology plans Production and delivery Schedules Quality Requirements Design/ Performance specs

Hiring/firing Training Legal requirements Union contract negotiations

Human Resources 20/01/10

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Strategy for Operations Corporate strategy • Goals • Core competencies • Environmental responses • New products/ services • Global strategies

Market analysis Competitive priorities

Operations strategy Services

• Standardized services • Assemble-to-order • Customized services • • • •

Manufacturing

• Make-to-stock • Assemble-to-order • Make-to-order

• Segmentation • Needs assessment

Capabilities Operations Marketing • Cost • Quality Finance • Time • Flexibility Others

• Current • Needed • Plans

Process decisions Quality decisions Capacity, location, and layout decisions Operating decisions

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The Production Process Idea generation

Suppliers

R&D

Marketing

Product or service concept

Feasibility study

Form design

Customers

Competitors

Performance specifications

Revising and testing prototypes

Production design

Functional design New product or service launch Final design & process plans

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Design specifications

Manufacturing or delivery specifications

Pilot run and final tests

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Products in the Life Cycle: Stages, Sales, Cost and Profit

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Processes at Manufacturing Organizations Project process

High

• •

Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes

Job process

Customization

• •

Machining precision metal tubes Internal consulting team at manufacturing firm

Batch process • •

Forging process to make fittings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant

Line process • •

Auto assembly King Soopers bread line

Continuous process • •

Oil refining process Borden’s pasta making process

Low Low 20/01/10

Volume

High 28

Processes at Service Providers Project process

High

• •

Real estate process for leasing and constructing facilities for large insurance company Student team’s field project

Customization

Job process • •

Customer service process at financial services firm General medical practice

Batch process • •

Order fulfillment process of importer/distributor Placing purchase orders at public relations agency

Line process • •

Cafeteria line Teller line at bank

Continuous process • •

Power generation plant Providing telephone line access

Low Low 20/01/10

Volume

High 29

Project Management Integration Management •Develop Project Charter •Develop Preliminary Project Scope Statement •Develop Project Management Plan •Direct and Manage Project Execution •Monitor and Control Project Work •Integrated Change Control •Close Project

Scope Management •Scope Planning

Time Management •Activity Definition •Activity Sequencing •Activity Resource Estimating

HR Management

Quality Management

•Activity Duration Estimating

•Human Resource Planning

•Quality Planning

•Schedule Development

•Acquire Project Team

•Perform Quality Assurance

•Scope Control

•Schedule Control

•Develop Project Team

•Perform Quality Control

Risk Management

•Manage Project Team

Procurement Management

Cost Management

•Risk Management Planning

•Plan Purchases and Acquisitions

•Risk Identification

Communications Management

•Cost Estimating

•Qualitative Risk Analysis

•Communications Planning

•Request Seller Responses

•Cost Budgeting

•Quantitative Risk Analysis

•Information Distribution

•Select Sellers

•Risk Response Planning

•Performance Reporting

•Contract Administration

•Risk Monitoring and Control

•Manage Stakeholders

•Contract Closure

•Scope Definition •Create WBS •Scope Verification

•Cost Control

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•Plan Contracting

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The Frameworks Quagmire of Quality Standards

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Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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Human Resource Management Functions and Process Planning

Organizing

•Goals and standards

•Tasks

•Rules and procedures

•Departments

•Plans and forecasting

•Delegating •Authority and communication

Staffing •Hiring •Recruiting •Selecting •Performance standards

•Coordinating

Leading •Getting the job done •Morale •Motivation

•Compensation •Evaluating performance •Counseling •Training and developing

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Controlling •Setting standards •Comparing actual performance to standards •Corrective action

33

Strategic Human Resource Management 

Linking HRM with strategic goals and objectives 





to improve business performance to develop organizational cultures fostering innovation and flexibility

HR helps strategy execution 

  

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Functional strategies should support competitive strategies Value chain analysis Outsourcing Strategy Formulation

Clarify the business strategy Realign the HR functions and key people practices Create needed competencies and behaviors Realization of business strategies and results Evaluate and refine 34

Human Resource Department Organizational Chart

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People CMM 

Using P-CMM 

as a guide in planning and implementing improvement activities



as a standard for assessing workforce practices.

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Hierarchy of Needs Self/Other Actualization Needs Esteem Needs Social Needs Safety Needs Physiological Needs 20/01/10

Self/Other/ Task-Actualization; Aliveness; Rightness; Simplicity; Playfulness; Self-Sufficiency; Truth Beauty Order; Justice Uniqueness Unity; Creating Meanings & Values; Doing One’s Best; Aesthetic; Appreciation of Nature; Art; Environment; Growth Development Challenge; Use of Potential; Discovery of Capacities; Learning and Knowing More and More; Striving for Quality; Improving Life Archievement Mastery Competence; Confidence; Indepencence; Self-Acceptance; Self-Trust; Usefulness; Self-Worth Reputation; Prestigate; Status Admiration; Appreciation; Recognition Importance; Autonomy Respect

Growth Needs Basic Needs

To Be Kind; To Express Affection; To Help; To Encourage; To Cooperate; To Be Responsible; To Share; To Give Love; To Be Intimate; To Empathize; To Be a Good Friend To Be Loved; To Receive Affection; To Belong; To Be Accepted; To Have a Place in a Team; To Have Friends & Family; To Be Understood; Predictable Situation; The Familiar; Order; Stablility; Consistency of Relationship; Justice; Fairness; Freedom from Interpersonal Danger Personal Safety & Protection; Freedom from Illness, Danger & Pain; Job Security; Financial Security; Insurance; Retirement; Future Satisfaction of Physical Needs;

Food; Water; Shelter; Sleep; Rest; Air; Exercise; Sensory; Stimulation; Sex; Proper; Nutrition; Vitamins; Freedom from Disease and Pain 37

Seven Habits of Highly Effective People 1.

2.

3.

4.

5.

6.

7.

Be Proactive: Principles of personal vision Begin with the End in Mind: Principles of personal leadership Put First Things First: Principles of personal Management Think Win/Win: Principles of interpersonal leadership Seek First to Understand, Then to be Understood Synergize: Principles of creative communication Sharpen the Saw: Principles of balanced self-renewal

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Decision Style Model Directive – combines a high need for problem structure with a low tolerance for ambiguity. Often these are decisions of a technical nature that require little information. Analytical – greater tolerance for ambiguity and tends to need more information. Conceptual – high tolerance for ambiguity but tends to be more a “people person”. Behavioral – requires low amount of data and demonstrates relatively shortrange vision. Is conflict-averse and relies on consensus. 20/01/10

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Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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Marketing Mix Product

Price

•Functionality

•List Price

•Quality

•Discounts

•Appearance

•Financing

•Packaging

•Leasing Options

•Brand

•Allowances

•Service

Promotion

•Support

•Advertising

•Warranty

•Public Relations

Place

•Message

•Locations

•Direct Sales

•Logistics

•Sales

•Channel members

•Media

•Channel Motivation

•Budget

•Market Coverage •Service Levels

7-Ps Extended Marketing Mix

•Internet Mobile

•People •Process •Physical Evidence

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Marketing Mix Means Revenue Mix

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Market Research and the Marketing Process

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The Consumer Buying Process Personal & Environmental Factors Psychological Problem (Need) Recognition

Personal

Information Seeking

Social

Evaluation of Alternatives

Cultural

Purchase Decision

Postpurchas e Evaluation

Marketing Factors Product 20/01/10

Pricing

Promotion

Place

People

Process

Physical Evidence 44

Major Influences on Industrial Buying Behavior

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45

Customer Relationship Management Learn

Strategic Tactical

Operational

Execution 20/01/10

Communicate

Acquire

Fulfill

Who? What?

• Segment • Objectives • Strategic design

How much?

• Levers • Optimization • Channel strategies

When? Where?

• Training • Billing • Scheduling

How?

• Monitoring • Escalation • Resolution

Establish objectives, policies and operation footprint

Deploy resources to match opportunity with benefits

Prioritize, deploy, control and adjust

Interact with the customer across various channels

Service

46

Brand Management STEPS Identify and Establish Brand Positioning and Values

Plan and Implement Brand Marketing Programs

Measure and Interpret Brand Performance

Grow and Sustain Brand Equity

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KEY CONCEPTS Mental maps Competitive frame of reference Points-of-parity and points-of-difference Core brand values Brand mantra Mixing and matching of brand elements Integrating brand marketing activities Leveraging of secondary associations Brand Brand Brand Brand

Value Chain audits tracking equity management system

Brand-product matrix Brand portfolios and hierarchies Brand expansion strategies Brand reinforcement and revitalization 47

Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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The Firm and the Financial Markets Firm Invests in assets (B)

Financial markets

Retained cash flows (F) Short-term debt Cash flow from firm (C)

Dividends and debt payments (E)

Taxes (D)

Current assets Fixed assets

Firm issues securities (A)

Long-term debt Equity shares

Government

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Hypothetical Organization Chart Board of Directors Chairman of the Board and Chief Executive Officer (CEO) President and Chief Operating Officer (COO) Vice President and Chief Financial Officer (CFO)

Treasurer

Controller

Cash Manager

Credit Manager

Tax Manager

Cost Accounting

Capital Expenditures

Financial Planning

Financial Accounting

Data Processing

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The Balance-Sheet Model of the Firm Total value of assets Total firm value to investors Current Assets Current Liabilities How much short-term •Marketable securities •Account receivable •Inventory

What long-term investments should the firm engage in?

•Prepaid expenses

Fixed Assets •Tangible

cash flow does a company •Account payable need to pay its bills? •Wage & taxes payable

Net Working Capital

Long-Term Debt •Notes payable •Bonds payable

Owners’ Equity

•Land

•Common stock

•Building

•Paid-in capital

•Equipment

•Retained earnings

•Intangible

How can the firm raise the money for the required investments?

•Cash

•Patents •Trademarks

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The Income Statement Sales (Revenues)

- Cost of Goods Sold

Gross Profit

- Operating Expenses - Depreciation

Operating Income (EBIT) - Interest Expense

Income Before Taxes (EBT) - Taxes (28%)

Net Income

- Common Dividends Paid

Addition to Retained Earnings 20/01/10

52

Financial Analysis 1. Analysis of the funds needs of the firm.

Determining the financing

2. Analysis of the financial condition & profitability of the firm. 3. Analysis of the business risk of the firm.



Solvency Ratios: 

Short-term: Liquidity ratio measures a firm’s ability to pay its immediate debts  





Debt to Owners’ Equity Ratio = Debt / Owners’ Equity Leverage: DCL = DOL x DFL

Profitability Ratios: measure a potential earnings  



Current Ratio = Current Assets / Current Liabilities Working Capital = Current Assets – Current Liabilities

Long-term: Debt ratio measures a firm’s ability to meet its long-term debts 



needs of the firm.

Negotiations with suppliers of capital.

Return on Equity = Net Income / Total Owners' Equity Earnings Per Share = Net Income / # of Shares Outstanding

Activity Ratios: reflect management’s use of assets 

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Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

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Contents        

The Fundamentals of Business Managing the Business Enterprise Strategic Management Operation Management Human Resources Management Marketing Management Finance and Accounting Information System

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Information Architecture and IT Infrastructure

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Approaches to Infomation Systems TECHNICAL APPROACHES

COMPUTER

OPERATIONS

SCIENCE

RESEARCH

MANAGEMENT SCIENCE

MIS SOCIOLOGY

PSYCHOLOGY

POLITICAL SCIENCE

BEHAVIORAL APPROACHES 20/01/10

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Major Types & Interrelationships of Systems in Organizations

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IT Infrastructure for Knowledge Management

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The Value Chain in the Information Age

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Qualification for a CIO

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The Emerging Digital Firm Electronic Business Electronic Commerce Factories • Just-in-time production • Continuous inventory replenishment •Production planning

Customers •On-line marketing •On-line sales Built-to-order • products •Customer service • Sales force automation

Remote offices and work groups Communicate • plans and policies •Group collaboration Electronic • communication •Scheduling

Suppliers •Procurement • Supply chain management Business partners •Joint design •Outsourcing

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