Business Management and Administration Essentials
1. Basic Elements in Planning: From Vision to Goals
1.1. Vision
Determines the desired future state of the company. It’s an aspirational and achievable image that serves as an idealization of the company’s long-term goals.
1.2. Mission
Establishes the fundamental socioeconomic purpose of a business and the principles that will guide its operations. The mission is the company’s raison d’être.
1.3. Objectives and Goals
Specific, quantifiable, and time-bound aims that direct the organization’s activities. They represent the realization of the principles established in the mission and must be consistent with it. Objectives help establish priorities, provide standards for comparing results, and unify the efforts of all members around common goals.
2. Principles of Organizational Design
2.1. Vertical Design Principles
2.1.1. Authority
The right or ability to command, be obeyed, and make decisions that affect others. This concept is evolving towards the idea of leadership.
2.1.2. Hierarchy
The creation of ordered levels where the principle of authority is exercised.
2.2. Horizontal Design Principles
2.2.1. Division of Labor
The division of tasks or functions among members of an organization to reduce effort and improve the quantity and quality of results.
2.2.2. Specialization
The permanent assignment of a specific task to each person, making them an expert in that function. This leads to greater proficiency, time savings, and cost reduction (learning effect).
3. Job Analysis in Human Resources
Job analysis involves studying the functions, tasks, and operations performed by each employee and defining the requirements needed to perform these functions effectively. It consists of two parts:
3.1. Job Description
Determines the elements that characterize the position:
- Job title
- Position in the organizational structure
- Content of the position (tasks or functions)
3.2. Job Specification
Determines the requirements and responsibilities a worker must have to fill the position.
4. Sources of External Funding
4.1. Short-Term Funding
- Supplier credit
- Bills of exchange
- Factoring
4.2. Long-Term Funding
- Long-term loans
- Equity financing
- Leasing
5. Characteristics of Services and Their Management
Unlike material goods, services are intangible, cannot be stored or transported, and must be consumed at the moment they are produced. This leads to differences in their management.
6. Owner’s Responsibility in Different Business Structures
6.1. Sole Proprietorship
The owner bears all the risk and is personally liable for all business commitments.
6.2. Corporation or Limited Liability Company
The liability of the members is limited to their contribution to the company.
7. Centralized vs. Decentralized Organization
The degree of decentralization refers to the level at which decisions are made. In a centralized organization, decisions are primarily made at the highest levels. In a decentralized organization, decision-making is distributed across all hierarchical levels.
8. Generic Business Strategies
A company can follow three basic strategies:
- Cost Leadership: Achieving the lowest costs in the industry to compete based on price (e.g., DIA in the distribution sector).
- Differentiation: Building a unique reputation that makes products attractive regardless of price (e.g., Hipercor or Carrefour in the distribution sector).
- Focus (Segmentation): Concentrating on a specific market segment and achieving a competitive advantage that other companies cannot match. This can involve cost leadership or differentiation within the chosen segment (e.g., Urende specializing in electronic equipment and appliances).
9. Management by Objectives (MBO)
MBO aims to motivate employees by involving them in setting their own goals and providing them with clear performance evaluation criteria. It involves three phases:
- Superiors and subordinates agree on goals for the next period.
- Periodic meetings to assess progress towards objectives.
- Evaluation of results at the end of the period.
Part of the compensation is often variable and linked to performance. MBO can be motivating because it:
- Allows employees to measure their own progress.
- Provides greater autonomy.
- Increases regular communication between subordinates and superiors.
- Helps employees understand how their efforts contribute to the organization’s overall goals.
- Provides a framework for making decisions about compensation.
10. Types of Communication in a Company
(Content on communication channels was not provided in the original text and cannot be generated without further information.)
11. Staff Turnover Rate at Mercadona
Staff turnover rate measures personnel changes relative to the average number of employees. An increase in this rate is generally considered negative as it may indicate employee dissatisfaction. Effective personnel policies should aim to reduce this rate.
12. Analysis of Economic and Financial Returns
If a company’s economic returns remain constant while its debt ratio decreases, and the economic return is greater than the cost of financing, the financial return will decrease due to the lower level of debt.
13. Limitations of the Payback Period Method for Investment Evaluation
The payback period method calculates the time it takes to recover an investment. Its drawbacks include:
- It doesn’t consider the time value of money.
- It ignores cash flows after the payback period.
- It adds non-homogeneous quantities (occurring at different points in time) for comparison with the initial outlay.
More appropriate methods include Net Present Value (NPV) and Internal Rate of Return (IRR), which are dynamic methods that consider the time value of money and the entire investment lifespan.
14. Bills of Exchange as a Means of Financing
Discounting bills of exchange involves sending a bill to a credit institution for collection. The institution advances the funds to the company, minus a discount representing interest for the time remaining until the bill’s maturity. The company remains liable for the bill’s payment. If the customer defaults, the institution returns the bill to the company and deducts the advanced amount from the company’s account.
15. Advertising vs. Sales Promotion
15.1. Sales Promotion
Involves incentives or gifts (e.g., free samples, coupons, sweepstakes) to promote products. These are short-term actions aimed at capturing market share, reducing excess inventory, or launching new products. Promotions lose effectiveness over the long term.
15.2. Advertising
A form of mass communication using various media (e.g., TV and radio spots, billboards, print ads). It reaches large audiences but can be less effective than other methods due to high levels of wasted impacts and reduced attention from advertising saturation. However, it allows for continuous message repetition and can enhance brand attractiveness.
16. Brand Strategies
16.1. Single Brand Strategy
Using the same brand for all products, even if they are different (e.g., Yamaha for motorcycles and musical instruments).
16.2. Multi-Brand Strategy
Using different brands for different products, allowing for better market segmentation (e.g., L’Oreal with brands like L’Oreal Paris, Biotherm, The Body Shop).
16.3. Distributor’s Brand
The distributor creates their own brand to gain market control and reduce reliance on manufacturer advertising (e.g., Mercadona-Hacendado, Dia-Dia, Hipercor-Aliada).
17. The Circular Flow of Income
This model describes a simplified economy with two agents: households and companies. Households own factors of production and consume products. Companies produce goods using factors of production purchased from households. Households receive income from selling factors of production, which they use to buy goods from companies, completing the cycle.
18. Competitive Advantage
Competitive advantage is superior performance achieved by a company that meets the following conditions:
- It must be important to the consumer.
- It must be perceived by the consumer.
- It must be sustainable (difficult for competitors to imitate, acquire, or substitute).
19. Basic Functions of Management
Management consists of four basic functions:
19.1. Planning
Setting goals and defining future actions to achieve them.
19.2. Organizing
Designing the structure that enables optimal performance. This includes defining roles, responsibilities, and authority for each member and establishing relationships within the organization.
19.3. Leading
Executing the planned actions using available resources.
19.4. Controlling
Comparing planned outcomes with actual results and taking corrective actions if necessary.
20. Trade Credit
Trade credit is the deferral of payment for purchased raw materials or goods. It’s a source of short-term financing for current assets. It’s not always free, as suppliers may offer discounts for early payment. Example: A distributor of industrial products acquires goods and agrees to pay suppliers within 60 days.
21. Negative Financial Maturity Period
Financial maturity period is the difference between the economic maturity period and the average payment period to suppliers. Large retailers often have a negative financial maturity period because they don’t produce goods (no raw material storage or manufacturing stage), have short finished goods storage times (high turnover), and often receive immediate payment from customers. Their strong negotiating power allows them to extend payment terms to suppliers, resulting in a longer average payment period and a negative financial maturity period.
22. Pricing Methods
Three basic methods for determining product prices:
22.1. Cost-Based Pricing
Adding a markup (percentage) to the cost to determine the selling price. Methods include total cost and partial cost (marginal cost). Cost represents the lower limit for the selling price.
22.2. Demand-Based Pricing
Setting the price based on consumers’ willingness to pay, regardless of production costs. Demand sets the upper limit for the selling price.
22.3. Competition-Based Pricing
Setting the price relative to competitors’ prices. Options include pricing above, at, or below the competition.
23. Mass Marketing vs. Customized Marketing vs. Segmentation
23.1. Mass Marketing
Treating all consumers as a single unit and offering the same product and marketing message to everyone.
23.2. Customized Marketing
Tailoring the product and marketing message to the specific needs of each individual customer.
23.3. Segmentation
Grouping customers into segments based on shared needs or behaviors and developing targeted marketing offers for each segment. The challenge lies in identifying relevant segments and crafting effective messages for each.
24. General Criteria for Market Segmentation
- Demographic: Gender, age, marital status, household size.
- Socioeconomic: Income level, profession, education.
- Geographic: Country, region.
- Psychographic: Lifestyle, personality.
25. Job Analysis in Human Resources (Repeated from Section 3)
(Content is the same as in Section 3 and is not repeated here.)