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
20/01/10 2
 What Is a Business?

For-Profit Non-Profit

Money Motive Social Service

Ethical Conduct

Efficiency Effectiveness

Social Responsibility

20/01/10 3
 Categories of Business
Characteristics of Characteristics of
Goods Producing
ProducingGoods
Goods Providing Services
Providing Services Service
•Tangible product •Intangible product
•Consistent product definition •Inconsistent product definition
•Production usually separate •Produced & consumed at same
from consumption time
•Low customer interaction •High 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 Natural
Capital EntrepreneursKnowledge
Resources Resources

Factors of Production Finance, Insurance

Manufacturing Transportation, Utilities
Wholesale & retail trade
Construction
Mining
Goods Services Banking, Entertainment
Health care, Repairs
Agriculture Information

20/01/10 5
Business Stakeholders
•Maintain stable employment in firm
•Receive quality goods in a timely fashion
at reasonable cost •Receive fair pay for work
•Offer reliable products that consumers •Work in safe, comfortable environment
trust and value
•Receive a
Distributors, Employees satisfactory
return on
Wholesalers, Stockholders investments
Retailers •Realize
appreciation in
stock value over
time
•Purchasing
goods from
Business
competitors
firm •Receive
•Boycotting
companies repayment of
loans
whose Customers Creditors
products are •Collect debts
unsatisfactory and interest
or whose
policies are
unacceptable
Suppliers •Receive regular orders for goods
•Be paid promptly for supplies
delivered

20/01/10 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  How it goes to the market

 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
 promotion strategy
 distribution strategy
 How it defines the tasks to be
performed
 How it configures its resources
 How it captures profit

20/01/10 7
Growth Model

20/01/10 8
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Managing Human Resources
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 9
Business Management Process
 Planning
 Develop strategies for success
 Set goals & objectives
 Develop action plans
 Organizing
 Employee activities
 Facilities and equipment
 Decision making
 Supervision
 Resource distribution
 Leading
 Influencing people
 Motivating people
 Controlling
 Monitoring progress
 Resetting the course
 Correcting deviations

20/01/10 10
Strategic Planning
 Market standing 1 Clarity 2 Mission
of Vision Statement
 Innovation
 Human resources
 Financial 3 Forecasting
4 Competitive
Analysis
resources
 Physical resources
 Productivity 5 Goals 6 Action Plans
and Objectives
 Social
responsibility
 Strategy: The
 Corporate Strategy
broad set of action
 Financial plans to achieve
 Business Strategy
Functional Strategy
performance

company goals

20/01/10 11
Organizing
 Make long-range
plans
 Establish policies
President,  Represent the
CEO, VP company

 Implement goals
Controller, Marketing  Make decisions
Manager, Sales Manager  Direct first-line
managers

 Implement plans
Office Manager,  Oversee workers
Supervisor, Foreman,  Assist middle
Department Head managers

20/01/10 12
 Leading
 Leadership Styles  Continuum of Leader Behavior
 Autocratic
 Democratic
Manager Makes Decision Boss-Centered
 Laissez-faire
 Contingency
Manager Sells Decision
 Leadership Functions
 Coaching
 Managing Change Manager Presents Ideas Authority of Managers
 Mentoring
Manager Makes
 Corporate Culture Tentative Decision

Company Manager Presents Problem Freedom for Workers

People Company
People Values
Values
Manager Sets Decision Limits
Employee Communi- Community
Employee Communi- Community
Performance cation Involvement Employees Make Decision Employee-Centered
Performance cation Involvement

20/01/10 13
Controlling
 Management
 The Control Cycle
Skills
 Interpersonal
 Technical
 Administrative
 Conceptual
 Political
 Time
management
 Global
management
 Information and
technology

20/01/10 14
 Value Based Management
Methods, Models and Theories
Strategy - Valuation - Organization - Communication - Leadership -
Value Creation Decision Making Change - Culture Marketing Management
•Business simulation •Activity based costing •BPR •7 Ps marketing mix •Crisis management
•Competitive •Balanced scorecard •CMM •BCG matrix •Emotional intelligence
Advantage
•Brainstorming •Change management •Brand asset valuator •Enterprise
•Core competence Architecture
•Break-even point •Corp. governance •Bricks and clicks
•Core groups •Human capital index
•Business intelligence •Culture change •Corporate peputation
•Cost-benefits •Just-in-time
•Earnings per share •Expectancy theory •Distinctive capability
analysis •Leadership styles
•EVA •Growth phases •Groupthink
•Experience curve
•PDSA/PDCA cycle
•GAAP •Hierarchy of needs •Innovation adoption
•Game Theory
curve •Results-based
•IRR •Learning org. leadership
•Industry Life Cycle
•Marketing Mix 4/5P's
•Market value added •People CMM •Root cause analysis
•MBO
•PEST analysis
•NPV •Result oriented •Seven surprises
•Outsourcing
management •Product/market grid
•Operating cash flow •Six sigma
•SWOT analysis
•Seven habits •Profit pools
•Theory of constraints •Payback period •Theory X Theory Y
•System thinking •Theory of reasoned
•ROI •TQM
•Value chain action

20/01/10 15
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 16
Traditional Strategy
Development
“Strategy without tactics is the slowest route to
victory. Tactics without strategy is the noise
before defeat.”
Sun Tzu [Wu] (BC 535 - 228)
Fo
St rm
r a 10%
Pl ateg l 50%
an
ni ic
ng Realized Total
Str ategy
Realized
Strategy
te ed
ra liz
gy
St rea
Un

Emergent Strategies

yr ne H
(unintended strategies due to a learned

gr ebzt ni M
90% pattern of behavior or unforeseen events)

20/01/10 17
 Strategic Management Model
Environmental
Strategy Strategy Evaluation
and Control
Scanning Formulation Implementation and Control

External Mission
Reason for
Societal
existence
Environment Objectives
General Forces
What results
to
Task Strategies
accomplish
Environment
by when Plan to
Industry Analysis
achieve the
Policies
mission &
Internal objectives Broad
Guidelines Programs
Structure for Process
Chain of Command decision Activities to monitor
needed to performance
making Budgets
Culture accomplish and take
Beliefs, Expectations, a plan corrective
Cost of the
Values action
programs Procedures
Resources
Sequence
Assets, Skills
of steps
Competencies,
needed to
Knowledge do the job Performance

Feedback/Learning

20/01/10 18
Strategic Decision Making

20/01/10 19
Strategy Map

20/01/10 20
 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

20/01/10 21
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 22
Operations as a
Transformation Process
 Historical
events in OM
 Industrial
revolution
 Scientific
management
 Human
relations
 Management
science
 Quality
revolution
 Globalization
 Information
age/internet
revolution

20/01/10 23
 Operations as the
Technical Core
Finance/Accounting
Production and Budgets
Inventory data Cost analysis
Capital budgeting requests Capital investments
Capacity expansion and Stockholder
Orders for materials Technology plans requirements Product/Service
Production and delivery Availability
Schedules Quality Lead-time estimates

Marketing
Suppliers

Requirements Design/ Status of order

Performance specs Delivery schedules
Operations
Material availability Sales forecasts
Quality data Customer orders
Delivery schedules Customer feedback
Designs Personnel needs Promotions
Hiring/firing
Skill sets
Training
Performance evaluations
Legal requirements
Job design/work
Union contract negotiations
measurement

Human Resources

20/01/10 24
Strategy for Operations
Corporate strategy
• Goals
• Core
• Segmentation
competencies
• Environmental
Market analysis • Needs assessment
responses
• New products/
services Competitive priorities Capabilities
• Global strategies
Operations Marketing • Current
• Cost • Needed
Operations strategy • Quality Finance • Plans
• Time
Services Manufacturing • Flexibility Others
• Standardized services • Make-to-stock
• Assemble-to-order • Assemble-to-order
• Customized services • Make-to-order

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

20/01/10 25
 The Production Process
Idea Feasibility
generation study Performance
Product or
service concept specifications

Suppliers Customers Form design

R&D

Marketing Competitors Revising and testing

prototypes

Functional Production
design design
Design Manufacturing
New product or specifications or delivery
service launch specifications
Pilot run
Final design and final tests
& process plans

20/01/10 26
Products in the Life Cycle:
Stages, Sales, Cost and Profit

20/01/10 27
 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
• Machining precision metal tubes
Customization

• 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 High
20/01/10
Volume 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

Job process
Customization

• 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 High
20/01/10
Volume 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
Time Management
Scope •Activity Definition
Management •Activity Sequencing
•Scope Planning •Activity Resource Estimating HR Management Quality Management
•Scope Definition •Activity Duration Estimating •Human Resource Planning •Quality Planning
•Create WBS •Schedule Development •Acquire Project Team •Perform Quality Assurance
•Scope Verification •Schedule Control •Develop Project Team •Perform Quality Control
•Scope Control •Manage Project Team
Risk Management Procurement Management
Cost •Risk Management Planning Communications •Plan Purchases and Acquisitions
Management •Risk Identification Management •Plan Contracting
•Cost Estimating •Qualitative Risk Analysis •Communications Planning •Request Seller Responses
•Cost Budgeting •Quantitative Risk Analysis •Information Distribution •Select Sellers
•Cost Control •Risk Response Planning •Performance Reporting •Contract Administration
•Risk Monitoring and Control •Manage Stakeholders •Contract Closure

20/01/10 30
The Frameworks Quagmire of
Quality Standards

20/01/10 31
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 32
Human Resource Management
Functions and Process
Planning Organizing
•Goals and standards •Tasks
•Rules and procedures •Departments
•Plans and forecasting •Delegating
•Authority and
communication
•Coordinating
Staffing
•Hiring
Leading
•Recruiting
•Getting the job done
•Selecting
•Morale
•Performance
standards •Motivation

•Compensation
•Evaluating Controlling
performance
•Setting standards
•Counseling
•Comparing actual
•Training and performance to standards
developing
•Corrective action

20/01/10 33
Strategic Human Resource
Management
 Linking HRM with strategic Clarify the business
strategy
goals and objectives
 to improve business Realign the HR
performance functions and key
 to develop organizational people practices
cultures fostering innovation
and flexibility
Create needed
competencies
 HR helps strategy execution and behaviors
 Functional strategies should
support competitive strategies
Realization of business
 Value chain analysis
strategies and results
 Outsourcing
 Strategy Formulation
Evaluate and refine

20/01/10 34
Human Resource Department
Organizational Chart

20/01/10 35
People CMM
 Using P-CMM
 as a guide in
planning and
implementing
improvement
activities
 as a standard
for assessing
workforce
practices.

20/01/10 36
 Hierarchy of Needs
Self/Other/
Task-Actualization;
Aliveness; Rightness; Simplicity;
Self/Other Playfulness; Self-Sufficiency;
Truth Beauty Order; Justice Uniqueness Unity;
Actualization Creating Meanings & Values; Doing One’s Best;
Needs 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
Growth Needs
Esteem Archievement Mastery Competence;
Confidence; Indepencence; Self-Acceptance;
Needs Self-Trust; Usefulness; Self-Worth Basic Needs
Reputation; Prestigate; Status Admiration;
Appreciation; Recognition Importance; Autonomy Respect
To Be Kind; To Express Affection; To Help; To Encourage;
Social To Cooperate; To Be Responsible; To Share; To Give Love;
Needs 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;
Safety Consistency of Relationship; Justice; Fairness; Freedom from Interpersonal
Needs Danger
Personal Safety & Protection; Freedom from Illness, Danger & Pain; Job Security;
Financial Security; Insurance; Retirement; Future Satisfaction of Physical Needs;
Physiological Food; Water; Shelter; Sleep; Rest; Air; Exercise; Sensory; Stimulation;
Needs Sex; Proper; Nutrition; Vitamins; Freedom from Disease and Pain

20/01/10 37
Seven Habits of
Highly Effective People
1. Be Proactive: Principles
of personal vision
2. Begin with the End in
Mind: Principles of
personal leadership
3. Put First Things First:
Principles of personal
Management
4. Think Win/Win:
Principles of
interpersonal leadership
5. Seek First to
Understand, Then to be
Understood
6. Synergize: Principles of
creative communication
7. Sharpen the Saw:
Principles of balanced
self-renewal

20/01/10 38
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 short-
range vision. Is conflict-averse
and relies on consensus.

20/01/10 39
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 40
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 7-Ps Extended
•Service Levels Marketing Mix
•Internet Mobile •People
•Process
•Physical Evidence

20/01/10 41
Marketing Mix Means
Revenue Mix

20/01/10 42
Market Research and the
Marketing Process

20/01/10 43
The Consumer Buying Process
Personal & Environmental Factors
Psychological Personal Social Cultural

Problem Information Evaluation of Purchase Postpurchas

(Need) Seeking Alternatives Decision e Evaluation
Recognition

Marketing Factors
Physical
Product Pricing Promotion Place People Process Evidence

20/01/10 44
Major Influences on
Industrial Buying Behavior

20/01/10 45
Customer Relationship
Management
Commu-
Learn Acquire Fulfill Service
nicate

Who? What? • Segment

Strategic Establish objectives, policies • Objectives
and operation footprint • Strategic design

How much? • Levers

Tactical Deploy resources to match • Optimization
opportunity with benefits • Channel strategies

When? Where? • Training

Operational Prioritize, deploy, control and • Billing
adjust • Scheduling

How? • Monitoring
Interact with the customer • Escalation
Execution across various channels • Resolution

20/01/10 46
Brand Management
STEPS KEY CONCEPTS
Mental maps
Identify and Establish Competitive frame of reference
Brand Positioning and Values Points-of-parity and points-of-difference
Core brand values
Brand mantra

Plan and Implement Mixing and matching of brand elements

Brand Marketing Programs Integrating brand marketing activities
Leveraging of secondary associations

Brand Value Chain

Measure and Interpret Brand audits
Brand Performance Brand tracking
Brand equity management system

Brand-product matrix
Grow and Sustain Brand portfolios and hierarchies
Brand Equity Brand expansion strategies
Brand reinforcement and revitalization

20/01/10 47
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 48
The Firm and the
Financial Markets
Firm Firm issues securities (A) Financial
markets
Invests Retained
in assets cash flows (F)
(B)
Short-term debt
Current assets Cash flow Dividends and
Long-term debt
Fixed assets from firm (C) debt payments (E)
Equity shares

Taxes (D)

Government

20/01/10 49
 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

20/01/10 50
 The Balance-Sheet Model
of the Firm
Total value of assets Total firm value to investors
Current Assets How much short-term Current Liabilities
•Cash cash flow does a company •Account payable
•Marketable securities need to pay its bills? •Wage & taxes payable

How can the firm raise the money

•Account receivable
Net Long-Term Debt
•Inventory

for the required investments?

•Prepaid expenses
Working •Notes payable
Capital •Bonds payable
What long-term investments

Fixed Assets
should the firm engage in?

•Tangible Owners’ Equity

•Land •Common stock
•Building •Paid-in capital
•Equipment •Retained earnings
•Intangible
•Patents
•Trademarks

20/01/10 51
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
Determining
1. Analysis of the funds needs of the firm. the financing
Negotiations
2. Analysis of the financial condition & profitability of the firm. with
needs of suppliers of
3. Analysis of the business risk of the firm.
the firm.
capital.

 Solvency Ratios:
 Short-term: Liquidity ratio measures a firm’s ability to pay its immediate debts
 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
 Debt to Owners’ Equity Ratio = Debt / Owners’ Equity
 Leverage: DCL = DOL x DFL
 Profitability Ratios: measure a potential earnings
 Return on Equity = Net Income / Total Owners' Equity
 Earnings Per Share = Net Income / # of Shares Outstanding
 Activity Ratios: reflect management’s use of assets
 Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

20/01/10 53
Contents
 The Fundamentals of Business
 Managing the Business Enterprise
 Strategic Management
 Operation Management
 Human Resources Management
 Marketing Management
 Finance and Accounting
 Information System
20/01/10 54
Information Architecture and
IT Infrastructure

20/01/10 55
Approaches to Infomation
Systems
TECHNICAL APPROACHES
COMPUTER
OPERATIONS
SCIENCE
RESEARCH
MANAGEMENT
SCIENCE
MIS
SOCIOLOGY

PSYCHOLOGY POLITICAL
SCIENCE
BEHAVIORAL APPROACHES

20/01/10 56
Major Types & Interrelationships
of Systems in Organizations

20/01/10 57
IT Infrastructure for Knowledge
Management

20/01/10 58
The Value Chain in the
Information Age

20/01/10 59
Qualification for a CIO

20/01/10 60
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

20/01/10 61
20/01/10 62