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Business Environment - Coggle Diagram
Business Environment
Stakeholders in Business Organisation
Business Organisation
Concepts
Components
Controlled performance
Social arrangement
Collective goals
Advantages
Capacity (size)
Synergy
Specialisation
Reduced risk
Features
Stakeholders
Assets (Capital)
Operating Environment
Managed Activities
Differences
Size
Ownership
Capital structure / Funding
Activitty
Organisational structure
Strategy
Culture
Not-for-Profit
Types
Public sector organisations
Differences
Owners
Sources of funding
Goals
Non-governmental organisations (NGO)
Performance measure
3 Es Value-for-Money
Efficiency
Economy
Effectiveness
Commercial
Sectors
Market-oriented
Global Industry Classification Standard (GICS)
Industrial Classification Benchmark (ICB)
Production-oriented
Types
Sole Trader
Differences
Ownership
Liability
Management
Employees
Legality
Profit-sharing
Partnerships
Company
Cooperative
Performance measure
Profitability
Return on investment
Share price increase
Differences
Primary objective
Organisation structure
Performance measure
Operational activities
Management
Stakeholder
Definition
Silent entities
Environment
Society
Interested entities
Local residents
Special interest groups
Regulators
Commercial entities
Types
Contractual relationship
Connected Stakeholders
Suppliers
Customers
Lenders
Shareholders
Employed
Internal Stakeholders
Managers
Employees
Directors
Have interest / Secondary stakeholders
External Stakeholders
Special Interest (Lobby) Groups
Local Communities and General public
Government
Agency relationship
Definition
Principals empower agents to act on behalf with fiduciary duty
managed through corporate governance to minimise conflicts of interest
Examples
Owners and directors
Shareholders and auditors
Directors and employees
Mendelow Matrix
High interest
High power
Key Players
Low power
Keep satisfied
Low interest
Low power
Minimal effort
High power
Keep informed
External Business Environment
PESTEL
Political
Economic
Macroeconomic environment
Economic Activity
3 facets of an economy
How do people interact with each other?
Trade can benefit everyone
Markets are a good way to organise economic activities
Governments can sometimes improve market outcomes
How does an economy work as a whole?
A country's standard of living depends on its ability to produce goods and services
Prices rise when the government prints too much money
Society faces a short-run trade-off between inflation and unemployment
How do people behave individually?
Cost of something is what you give up to get it
Rational people think at the margin
People respond to incentives
People face trade-offs
Macroeconomic aims
Economic growth
Controlled inflation and price stability
Full employment
GDP
Measured as the value of the economy’s total output at a given price level for a period
GDP per capita is simply GDP divided by mid-year population
Changes in the economy over time
The economy is producing a larger output of goods and services
Goods and services are being sold at higher prices
Types
Nominal GDP
GDP Deflator =
Real GDP
Balance of Payments
GDP = C+G+I+(X–M)
C: Consumption
G: Government Spending
I: Investment
NX: Net Exports
Exports = Exports - Imports
Y: Gross Domestic Product (GDP)
Macroeconomic Policies
Aims
Economic growth
Controlled inflation and price stability
Full employment
Policies
Savings and investment
Investment from abroad
Education
Health and nutrition
Property rights and political stability
Free trade
Research and development
Population growth
Areas
Fiscal
Government spending
Taxation
Government borrowings
Monetary
Interest rates
Exchange rates
Reserve requirements
Supply-side
Tax breaks
Grants
Aid
Deregulation
Price Equilibrium
Demand
The quantity of a good or a service that consumers are willing to buy in a given period at a given price
Law of demand
The negative relationship between the price and the quantity demanded, ceteris paribus (everything else is the same)
Supply
Law of supply
There is a positive relationship between the price and the quantity supplied of a good, ceteris paribus
The quantity of goods or services that the producers are willing to produce and offer in a given time period at a given price point
Price elasticity of demand
% change in quantity demanded / % change in price
Elasticity of A with respect to B = % change of A / % change of B
Degree of elasticity
Perfectly inelastic (E=0)
Change in quantity = 0
Inelastic
(E < 1)
% change in quantity is less than % change in price
Unitary elastic
(E = 1)
% change in quantity is equal to % change in price
Elastic
(E > 1)
% change in quantity is more than % change in price
Perfectly elastic
(E = ∞)
Quantity falls to 0 with any change in price
Features
Quantity demanded = Quantity supplied = Equilibrium quantity
Price charged = Market equilibrium price
Cost Minimisation
Production Function
A mathematical or numerical expression relates the maximum amount of output that can be obtained from the given number of inputs
Average Product
Average product of capital APK = Q/K
Average product of labour APL = Q/L
Marginal Product
Marginal product of labour MPL = Change of Q / Change of L
Marginal product of capital MPK = Change of Q / Change of K
Diminishing marginal utility
impacts the overall output and, thus, more input resources might not necessarily mean more profitable output in terms of utility
Labour
Capital
Isoquant CURVE
a graphical representation of all combinations of capital and labour that can yield the same amount of output
Isoquant curve = Change of K / Change of L
Isoquant curve = MPL / MPK
Marginal rate of technical substitution (MRTS)
MRTSKL = MPL/MPK
Properties
Isoquant curves are always downward-sloping
Higher isoquant curves are preferred to lower ones
Isoquant curves do not intersect
Isoquant curves are convex to the origin
Profit
Revenue
Price
Quantity
Cost
Cost of inputs
Combination of inputs used
Isocost LINE
graphically represents the different combinations of two inputs, such as labour and capital, that a firm can purchase within a fixed budget
cost-minimising combination of inputs
the point of tangency between the isoquant and isocost
Profit Maximisation
Cost types
Fixed costs
Variable costs
Opportunity cost
Sunk costs
Average fixed cost
Marginal cost
Average variable cost
Average total cost
Runs
Short Run
Quantity of at least one input is fixed
Long Run
Profit Maximisation Rule
Marginal Cost
Marginal Revenue = Total Revenue (n+1) - Total Revenue(n)
If MC<MR: The firm can increase production to generate additional profit.
If MC>MR: Producing additional units results in a loss, and output should be reduced.
MR=MC ⇒ Profit is maximised.
Market Structures
Components
The number of producers and sellers transacting in the market
The type of products in terms of how similar, homogeneous or differentiated it is within a market
The ease or difficulty with which firms can enter or exit the market
The extent to which firms have market power, i.e., they can determine the prices of their products
Perfectly competitive market
Number of sellers – A large number of buyers and sellers
Types of products – Identical or homogeneous products
Entry and exit – Free entry and exit of firms
Price – All producers are price takers. No individual control over market supply and price
Monopoly market
Number of Sellers – A firm is called a monopoly when it is the sole seller of a particular good or service.
Type of Product – No other firm sells the same goods or offers the same services. The demand for the firm’s products represents the market demand curve.
Entry and Exit – There are high entry and exit barriers.
Price – The firm has control over the price, so firms are price makers in the market.
Profit = Q
(AR-AC) = Q
(P - ATC)
Monopolistic Competition
has the characteristics of both competition and monopoly
Oligopoly
There are only a few producers.
Products are identical or differentiated
There are high barriers to entry
Producers follow price rigidity.
Social
Technological
Environmental
long-term sustainability
Profit
Planet
People
Legal
Data protection laws
Legal Responsibilities and Principles
Fairness
Transparency
Purpose limitation
Data minimisation
Accuracy
Storage limitation
Lawfulness
Data Protection Officers, Consent and Security
Empowering Data Subjects
Individual rights
Access
Rectification
Erasure
Restriction of Processing
To Be Informed
Portability
Objection
Avoidance of Automated Decision-Making