Business Management Fundamentals

Posted on Nov 27, 2024 in Economy

Item 1: Company Analysis

Balancing Acts

Gutenberg’s Balancing Acts

  • Top of Productivity: Ratio of output to input (technical efficiency).
  • Principle of Economists: Relationship between production value and commodity value (economic efficiency).
  • Top of Profitability: Relationship between company results and invested capital (economic efficiency of production resources, related to profit).

Well Balancing Acts

  • Top of Satisfaction
  • Top of Organizational Development
  • Principle of Balance of Power

Systems and Subsystems

System

Artificial, finalist, open, cybernetic (feedback), hierarchical (subsystems).

Problems:

  1. Identify objectives.
  2. Design the system.
  3. Operate within a given configuration.
  4. Check results.

Subsystems

  • Real: Sourcing, production, and marketing of products or services.
  • Financial: Recruitment, administration, and control of financial resources. Assessment of project profitability and funding costs.
  • Steering: Decisions for system control, adapting to higher-order systems.
  • Organizational: Interrelations between subsystems for proper company functionality.
  • Socio-technical: Interplay of social and technical aspects for organizational effectiveness. Goals and values influenced by socio-cultural values.
  • Structural: Divides and coordinates work within the organizational structure.
  • Administrative/Executive: Organizational cohesion, relations with the environment. Sets goals, designs organizational structure, and control systems.

Environmental Factors

Generic Environment

Factors defining the general framework over time, affecting everyone equally.

  • Economic: Resources, development, growth rates, prices, economic policy.
  • Politico-legal: Political system, government regulation, business promotion.
  • Sociocultural: Cultural guidelines, education level, demographics, income distribution.
  • Technological: Conventional technologies, access, innovation.

The generic environment affects the company, but the company cannot change it. However, its knowledge and study are important.

Specific Environment

Sector influencing strategy.

  • Complexity: Simple or complex factors.
  • Dynamism: Static or dynamic intensity of environmental factors.
  • Uncertainty: Low or high knowledge of factors.
  • Dynamism & Complexity & Uncertainty: Turbulent, intermediate, or stable.
  • Diversity: Present or absent.
  • Hostility: Hostile or favorable.

Forces of the Sector

  1. Threat of New Competitors: Determined by entry barriers (economies of scale, cost disadvantages, product differentiation, capital requirements, distribution access, government policy), entry incentives (industry profitability, growth rates), and company reactions (available resources, debt capacity, commitment to the sector).
  2. Rivalry Between Existing Competitors: Influenced by competitor concentration, industry growth rate, cost structure, product differentiation, excess capacity, and exit barriers.
  3. Pressure from Substitute Products: Substitute products increase rivalry. Protection strategies include changing product image, improving performance/price ratio, and increasing customer switching costs.
  4. Bargaining Power of Customers: Increases with concentrated buyers, significant purchase volume, standard products, low switching costs, importance of supply quality, customer information, and threat of backward integration.
  5. Bargaining Power of Suppliers: Increases with concentrated suppliers, differentiated products, high switching costs, essential products, and threat of forward integration.

Strategies

  • Strategic: Resource allocation, long-term impact, unstructured decisions, adaptation.
  • Tactical: Mobilizing resources for strategic decisions.
  • Operational: Routine and repetitive programming, quick corrections.

Interrelationships and Strategic Alternatives

Strategy is conditioned by market structure and resources, generating market responses. The benefits process and financial markets value future benefits and resources. Reinvestment of resources influences future strategies. The cycle is interrupted by revenue generation and investment through a strategy that yields profits and growth or incurs losses.

Strategic Alternatives

  • Differentiation Strategy: Unique product or service attributes (quality, design, brand image, customer service). Avoids price competition and homogeneity.
  • Cost Leadership Strategy: Increased efficiency at lower costs than competitors with acceptable quality, increasing market share and sales. Exploits market imperfections.

Item 2: Basic Functions of Business Management

  1. Planning: Reducing uncertainty in business activity.
  2. Organization
  3. Human Resources Management
  4. Control

Business Decisions

  • Strategic
  • Tactical
  • Operational

Management Skills

To be a great manager requires technical, interpersonal, and conceptual skills.

Interpersonal Roles

  • Figurehead: Represents the organization.
  • Leader: Influences others’ behavior to achieve objectives.
  • Liaison: Creates external networks for information and favor exchange.

Informational Roles

  • Monitor: Gathers information to understand the environment and organization.
  • Disseminator: Shares relevant information within the organization.
  • Spokesperson: Communicates information upwards and outwards.