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Unit 1 introduction to business management - Coggle Diagram
Unit 1 introduction to business management
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She my girlfriend
1.1 What is a business
Business: a decision making organisation involved in the process of using input to produce goods and services
Purpose -> create customers, combine human physical, financial resources to create goods and services to satisfy the needs and wants of people, organizations and the government
Production process:
Input —- processes —— output
Chain of production : production, manufacturing, services (tertiary and quarter are outputs), consumers
All the stages of a business sector is linked through the chain of production
4 stages in the business sector:
Primary: natural and raw resources
Secondary: manufacturing of raw materials
Tertiary: g&s sold to customers
Quaternary: technological services
4 main functions: marketing, HR, finance, Operations management
Entepreneur: an individual who plans, manages and organizes a business, taking a financial risk to do so
substantial risks
rewarded with profit
responsible for workforce
failures paid for by personal costs
Intrapreneur: An entrepreneur in a business and takes no finance risk
medium to high risks
rewarded by pay
accountable to the owner
failures absorbed by the org
challenges for starting a business:
lack of finance
poor marketing strategies
limited human resurces
lack of skills and expertise
Opportunities for starting a business:
Money
Autonomy
Challenges
Passions
Family ties
Unfilled market opportunities
Making a difference
1.3 Business objectives
Mission statement: the declaration of a business’s overall purpose. It forms the foundation for setting objectives for a business
short term
core question: what is our business
target: outlines the value of the business and creates a framework to do so
Vision statement: an outline of a business’s aspirations in the distant future
long term
core question: what do we want to become?
target: no target, broad in nature
Common business objectives:
Growth
Profit
Protecting shareholder value
Ethical objectives
Ethics: moral principles that guide decision-making and business strategy
Objectives: Specify what an organisation wants to achieve
[AO3]
Strategic objectives:
the long term goals of a business , used to achieve their targets such as : profit maximization, growth in market standing, increased market share
Increasing overal sales by 50% in 5 years
Tactical objectives
: short-term goals that affect a unit of the business. They are specific goals that guide the daily functioning of certain departments and operations.
Example: increasing brand recognition of Burger King in Vietnam
[AO3]
Corporate social responsibility
: the conscientious consideration of ethics and environmental practices related to business activities. A business that adopts CSR acts morally towards all of its stakeholder groups and the well-being of society as a whole
Ethical code of practice:
documents of beliefs and philosophies of a business, so people know what is acceptable or not within the business
refers to the ethical and strategic approach that businesses take to contribute positively to social, economic, and environmental concerns. It involves voluntary actions by businesses to address issues beyond their legal obligations, aiming to make a positive impact on society while balancing the interests of various stakeholders.
1.4 Stakeholders
Stakeholders: person/ organisation with a direct interest in, and is affected by the activities and performance of a business
Internal stakeholders:
employees
-managers
directors
shareholders
Trade union: org that aims to support and help its members by protecting their terms and conditions of employments
Pressure groups : collection of people who seek to influence political decisions in a pursuit of social cause
Directors: senior members of an organization who are elected to run a business on their behalf
managers: responsible for overseeing certain functions , organizations or departments within a business
External stakeholders (not part of the business but still has direct involvement):
customers
suppliers
pressure groups
competitors
the government
trade unions
Stakeholder conflict: difference in varying needs and priorities of the various stakeholder groups of a business
to deal with the conflict, managers looks at the three key issues:
the type of business entity
goals and objectives of a business
degree of power of each stakeholder group
1.5 Growth and evolution
Economies of scale: a lower average cost of production as a firm operates on a larger scale due to an improvement in its productive efficiency.
AC = TC / Q
AFC = TFC / Q
AVC = TVC / Q
Internal economies of scale:
technical economies : better machinery and capital
Financial economies: borrow large sums of money
managerial economies: dividing of roles with specialization
specialization economies: dividing work force
marketing economies: low ac by selling in bulk
purchasing economies: buying resources in bulk
risk - bearing economies : spreading fixed costs
External economies of scale:
Technological progress: increase in productivity of the industry
Improved transportation network: ensure prompt deliveries
Skilled labour: cut recruitment and training costs
Regional specialization: allow businesses to charge premium prices
Diseconomies of scale: the result of a higher unit costs as a firm increases in size
Internal diseconomies of scale:
lack of control and coordination: slow decision making
Poorer working relationships: senior managers becoming detached to lower down
Lower productive efficiency: disadvantages of of labour specialization
Beureaucracy: excessive administration, paperwork, company policies
Complacency: a lack of awareness of genuine risks
External diseconomies of scale:
Higher rents: add to fixed costs
Higher pay and financial rewards: retain workers, attract new staffs
Trafic congestion: deliveries are likely to be delayed
Internal growth:
when a business grows organically using its own capabilities and resources to increase the scale of its operations and sales revenue through
changing prices
better products
improved promotion
greater distribution channels
improved training and development
Adv:
better control and coordination
inexpensive
maintain corporate culture
less risky
Dis:
Diseconomies of scale
need to restructure
dilution of control and ownership
slower growth
External Growth: occurs through dealings with outside organizations rather than from an increase in the business’s own capabilities
by: mergers and acquisitions, takeovers, joint ventures, strategic alliances
Adv:
quicker than than organic growth
synergies (greater skills)
economies of scale
spreading of risks
reduced competition
Dis:
more expnsive
graduated risks
regulatory barriers
potential diseconomies of scale
-organizational culture clash
[AO3]
reasons to grow
:
economies of scale: cost saving benefits
lower prices: offer customers discounts
brand recognition: larger firms are more trusted
value-added services: provide wide range of services
greater choice: for customers
customer loyalty : perceived trust and overall value for money
[AO3]
reasons to stay small
:
cost control
loss of control
financial risks
government aid
local monopoly power
personalized services
flexibility
small market size: less competition
1.6 Multinational companies
[AO3]
MNC
: an organisation that operates in two or more countries, usually with a head office based in a home country. Can be also called “transactional corporation”
Why businesss want to become MNCs:
increase customer base
cheaper production costs
benefits of economies of scale
brand development and brand value
avoid protectionist policies
spread risks
Positive impacts of MNCs on host countries:
job creation
higher GDP
knowledge and technology transfer
increased competition
Negative impacts of MNCs on host countries;
job loss
repatriation of profits
vulnerability
-social responsibilities
competitive pressures
