Introduction to Business Administration
Economic and Social Functions of a Business
Economic Function
Maximize resources, both material and human.
Social Function
Meeting the needs of clients and serving as a source of work.
Marketing
1. Commercialization or Marketing
Marketing as a Philosophy
- Guidance to the product: Concern for efficiency and productivity.
- Sales orientation: Advertising campaigns to encourage customer purchases.
- Client orientation: Knowing and satisfying the customer, including post-sale recommendations.
- Orientation towards society: Rewarding consumers for choosing the company’s products.
2. Marketing Function
Maintaining and increasing market share, and finding new needs.
3. Marketing Strategy: Strategic Planning
Market Segmentation
Dividing consumers into homogeneous groups to better meet their needs.
- Geographic Criteria: Domestic, regional, local, and international.
- Demographic Criteria: Gender, age, sex, marital status.
- Socioeconomic Group Criteria: High, medium, low.
- Psychographic Criteria: Traditional, tolerant, technological, hedonistic.
Commercial Mix (4 P’s)
Price, product, place, promotion.
Product
A set of tangible and intangible attributes that deliver customer satisfaction.
- Economic utility of the product: The ability to satisfy a need.
- Product Life Cycle:
- Introduction: Few versions of the product, high advertising costs, educating the client, utility 0.
- Growth: Several versions of the product (competition), profits are not optimal.
- Maturity: Many versions of the product, profits are optimal, industry consolidates, few similar companies.
- Decline or Obsolescence: Product withdrawn from the market or reformulated.
Price Decisions
The market for a good or service is very sensitive to price, especially in a competitive market.
- Price may be directed to: Costs, market demand.
- Direct Cost: Fixed and variable costs.
- Absorbing Cost: Materials, direct labor, and manufacturing overhead costs.
Distribution Channels
Direct and indirect distribution. Direct distribution involves no intermediaries, while indirect distribution involves third parties.
- Indirect Distribution: Intensive, selective, exclusive.
- Pull: Twitching / Push: Pushing.
Promotion
Marketing communications that seek to persuade the customer.
- Differentiation Factors:
- a) Means of Communication: The objective is to recall the message through attention, interest, desire, and action.
- b) Goal: Other means of promotion include PR, which aims to improve public image.
- c) Merchandising: Stimulating desire from a marketing point of view.
- d) Personal Selling
- e) Free Advertising
- f) Sales Promotion
Product Differentiation: Positioning
How the company wants the customer to perceive its products: safe, economical, prestigious, natural, environmentally friendly.
- Umbrella Brand: Covering different products under one name: Unilever, Avon, Ebel.
- Industrial: Leader for each individual product.
- Individual Product Line: Metallurgical Virutex (Toilet and Kitchen Products).
- Associated Company Name: Bayer Aspirin.
Production Function
Objective
To transform input into a specific output.
- Technical Efficiency: Having 100% of resources working.
- Economic Efficiency: Choosing and utilizing resources in the best possible way.
- Rules: Control inventory, minimizing maintenance costs.
- Costs Handled in Inventories: Ordering, maintenance, purchasing, stock work order.
- LEC: Number of units that minimize working stock.
Fishnet CPM
To be a critical activity:
- Start times must be equal to each other.
- End times must be equal to each other.
- Activity start times must be equal to the term time.
- Critical activities have zero slack.
Finance Function
Objectives
- Determine Source of Funds:
- Sales: Operational and non-operational.
- Credits: Short, medium, or long term.
- Capital: Stock.
- Determine Use of Funds: To pay suppliers, purchase assets, pay debts.
Short-Term Finance
Company Strength
Balancing the liquidity of assets and enforceability of liabilities.
Assets are classified from most to least liquid, and liabilities are classified from most to least due.
A company is considered solid when assets equal current liabilities.
Solvency
The ability of a company to pay its debts.
Financial Ratios
- a) Current Ratio: Current Assets / Current Liabilities
- <1 = Cash flow problems
- = 1 Equilibrium
- > 1 Excess liquidity, inefficiency
- b) Acid Test: (Current Assets – Stocks) / Current Liabilities (More reliable indicator of strength)
- c) Rotation of Customers: Number of times the amount of money is paid. (Sales on Credit / Customer Balance)
- d) Time Average Collection: How many days it takes an average customer to pay their debts. (360 days / Rotation of Customers)
- e) Stock Turnover: The average delay in selling a commodity. (Purchases / Balance of Stock)
- f) Period Average Inventory: 360 days / Inventory Turnover (The delay in merchandise leaving the warehouse)