1Week 1 3/3/2014 Notes

Understanding What Businesses Do

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Term business used in number of ways:

o Overall field of business concepts
o Collective label for activity of many companies
o To indicate specific activities or efforts
o Synonym for company
Profit-seeking organization that provides goods and services designed to satisfy
customers needs

Adding Value: The Business of Business

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View businesses as a system for satisfying customers by transforming lower-value

inputs into higher-value outputs.
Each company in this chain make certain choices about what it will do to generate
revenue, money the company brings in through sales
Result of these decisions is a companys business model, clear, simple outline of
how business intends to generate revenue
Business model must also indicate how company is going to realize profit

Competing to Attract + Satisfy Customers

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As businesses create value-added products + offer them for sale, they are trying to
sell products to same customers, resulting in competition, giving customers a
wider range of options, increasing quality, improving customer services + lowering
prices
Free market companies generally have considerable freedom in deciding which
customers they want to focus on and how they want to compete
Each company seeks competitive advantage, making its products or the company
more appealing to chosen customers. Consumers benefit from better products +
more choices

Accepting Risks in the Pursuit of Rewards

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Every company must accept some level of risk to conduct business

A shift in consumer behavior , such as cash-strapped recession is an example,
these risks must be taken in anticipation of future rewards
2 reasons that this consideration is critical:
o Without promise of rewards, businesses would have no incentive to take
risks, reducing economic activity
o To encourage smart and responsible decision making, if companies believe
they can pursue rewards without facing risks attached to them, more likely
to engage in irresponsible and unethical behaviours, moral hazard

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Week 1 3/3/2014 Notes
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Identifying Major Types of Businesses

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Driving forces behind most businesses are prospects of earning profits and building
assets (from patents and brand names to real estate and company stock)
Not-for-profit organisations such as museums, universities and charities have no
profit motive, only operating efficiently and effectively to achieve their goals,
successful firms apply many business-manage principles
Can be classified into two broad categories, but many companies fall in both:
o Goods-producing businesses create value by making tangible goods,
including software, music and digital products
o Service businesses create value by performing activities that deliver benefit
to customer (finance, insurance, transportation, construction, utilities,
wholesale + retail trade, banking, entertainment, healthcare, maintenance
and repair)
Because they require large amounts of money, equipment, land and other
resources to get started + operate, goods-producing often seen as capital
intensive. Capital need to compete is a barrier to entry. Other barrier include
government testing + approval, tightly controlled markets, strict licensing
procedures, limited supplies of raw materials + need for highly skilled employees
Service businesses are labour-intensive businesses which rely more on human
resources, reduced from technology

Appreciating the Role of Business in Society

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Business has potential to contribute to society in many useful ways, including:

o Offering valuable goods and services
o Providing employment
o Paying taxes
o Contributing to national growth stability and security
However, there are many potentially negative effects that businesses can have on
society
o Generating pollution + creating waste
o Creating health and safety risks
o Disrupting communities
o Causing financial instability

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3Week 1 3/3/2014 Notes

Multiple Environments of Business

Social Environment
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Every business operates within broad social environment, trends + forces in

society at large
All companies affected by population trends that change composition of consumer
markets + workforce
o Baby boom generation (1946-1964) affected businesses as they moved
through childhood and adulthood to retirement. Occupied large number of
middle-upper management positions frustrating younger professionals
Various segments of society also have expectations about appropriate relationship
of business + society
Responsibility of company to stakeholders, all groups affect by activities is subject
of ongoing controversy

Technological Environment
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Have the potential to change every facet of business from altering internal
processes to creating or destroying market opportunities
Disruptive technologies, those that fundamentally change nature of industry can
be powerful enough to create or destroy entire companies
Social media may be the most disruptive technologies, by redefining relationships
between businesses + stakeholders. They redistributing power from vertical
hierarchies to horizontal networks

Economic Environment
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Every decision made is influenced by economic conditions + forces that affect cost
+ availability of goods, services and labour thereby shaping behavior of buyers +
sellers
A growing economy can increase demand and supporting increasing prices for
products, but may also incur increase in costs of labour and the material
companies need to do business
Strong economy can also prompt managers to make decisions that turn out to be
unwise in long term such as adding costly facilities or employee benefits
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Week 1 3/3/2014 Notes

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- A shrinking economy can damage even well-run, financially healthy companies by
limiting demand for products and availability of loans/investments needed to
expand operations

Legal and Regulatory Environment

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Every business affected by sum of laws and regulations at local, state, national and
international levels
Some businesses heavily regulated to point of government agencies determining
how much such companies can charge for services
Policies and practices of government bodies also establish overall level of support
for businesses operating within jurisdictions
Businesses prefer to do business in jurisdictions that offer lower costs, complexity
+ greater stability + predictability

Market Environment
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Every company operates within a specific market environment composed of 3

important groups
o Target customers
o Buying influences that shape behavior of those customers
o Competititors that market similar products to customers
Nature + behaviors of these groups + effect on business strategy vary widely from
industry to industry

Identifying Major Functional Areas in a Business Enterprise

Research and Development
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Products conceived + designed through R&D, sometimes known as product

design/engineering
Not all have R&D function, many companies resell products other firms make
For companies that develop products, R&D essential to survival because it provides
ideas + designs that allow firms to meet customer needs in competitive markets
Can also engage in this process to design new and better ways to run operations
Much of this goes into IT systems that promote communication + information
usage through company, allowing new services to be offered to customers

Manufacturing, Production + Operations

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Where company makes whatever it makes and does whatever it does

Supervises the actual production activity and responsible for wide range of other
strategies and decisions including purchasing, logistics and incoming flow of
materials and outgoing flow of finished products, facilities management
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Marketing, Sales, Distribution and Customer Support

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Marketing is charged with identifying opportunities in marketplace, working with

R&D to develop products to address those opportunities, creating branding +
advertising strategies to communicate with potential customers + setting prices
Sales function develops relationships with potential customers, persuading them
transaction by transaction to buy companys goods + services
Distribution function can be involved both before sale and after
Customer support goes to work after sale, making sure customers have support
and information needed

Finance and Accounting

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Responsible for every aspect of firms finances including ensuring that company
has funds needed to operate
Monitor and control how funds are spent, drafting reports for company
management and outside audiences
Accounting specialists work closely with other functional areas to ensure profitable
decision making

Human Resources
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Responsible for recruiting, hiring, developing, and supporting employees

Supports all other functional areas in enterprise
Also charged with making sure company is in compliance with many laws
concerning employee rights + workplace safety

Business Services
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Help companies with specific needs in law, banking, real estate and other areas
Can be performed by in-house staff, external firms or a combination of both
Firms may have permanent legal staff and accounting professionals on staff to
handle routine matters
Companies that sell shares of stock to public required to have financial records
audited by outside accounting firm

Careers in Business
Operations Manager
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Encompasses all the people + processes used to create goods + perform services
that a company sells
Work can involve wide range of tasks and disciplines, including production,
engineering, assembly, testing, scheduling, quality assurance, information
technology, forecasting, finance, logistics and customers support
Deals with fluctuating demand levels + process and supply problems
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Human Resources Specialist

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Plan and direct human resources activities that include recruiting, training +
development, compensation + benefits, employee and labour relations, and health
and safety
Develop and implement human resources systems and practices to accommodate
firms strategy and motivate and manage diverse workforces
Viewed as a tactical function concerned mostly with processing employee records
and other non-strategic duties
Becoming more strategic and focused on global competition to find, attract and
keep the best talent on the market

Information Technology Manager

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Evolving from tactical support function to critical strategic component

Reflecting ITs strategic importance, many midsize and large companies now have
Chief Information Officer (CIO) to plot IT strategy
Design, implement and maintain systems that help deliver the right information at
the right time to the right people in the organization

Marketing Specialist
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Identify and understand market opportunities and shaping the product, pricing and
communication strategies to pursue opportunities

Sales Professional
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Responsible for building relationships with customers and helping them make
purchase decisions
Most salespeople have specific targets or quotas they are expected to meet

Accountant
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Management accountants responsible for collecting, analyzing and reporting on

financial matters
Internal auditors verify work of the companys accounting effort and look for
opportunities to improve efficiency and cost-effectiveness
Public accountants offer accounting ,tax preparation and investment advice
External auditors verify financial report of public companies as required by law and
forensic accountants investigate financial crimes

Financial Manager
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Perform variety of leadership and strategic functions

Controllers oversee preparation of income statements, balance sheets and other
financial reports, frequently manage accounting departments
Treasurers and finance officers establish long-term financial goals and budgets,
investing firms funds and raising capital
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- Credit managers supervise credit accounts established for customers and cash
managers monitor and control cash flow

Achieving Professionalism
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Professionalism is the quality of performing at high level and conducting oneself

with purpose and pride, exhibiting 7 distinct traits:
o Striving to excel
o Being dependable + accountable
o Being a team player
o Communicating effectively
o Demonstrating a sense of etiquette
o Making ethical decisions
o Maintaining a positive outlook

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Week 1 3/3/2014 Notes
Ricky Chan