Business Key Elements and Functions What Is a Business? An - - PowerPoint PPT Presentation

Business

Key Elements and Functions

What Is a Business?

An individual or organization that tries to earn a profit by providing products/services that satisfy people’s needs

The People and Activities of Business

People: Owners Employees Customers Other stakeholders: Investors Regulatory Agencies Activities: Management Manufacturing Operations Marketing Finance

Types of Resources Used by Business

• Natural
• land, forests, etc. (not made by people)
• Material
• raw materials, components, utilities
• Human
• physical/mental abilities used by

people to produce goods and services

• Financial
• funds necessary to acquire needed

natural and human resources

What Is an Economic System?

• The way a society distributes its

resources to produce goods and services.

• Addresses the issue of how to

fulfill unlimited demand with limited supply of resources.

Basic Questions to Be Asked of Economic Systems

• What goods and services and what

quantity will satisfy the needs of the consumer?

• How will the goods and services be

produced?

• Who will produce them and with what

resources?

• How are the goods and services to be

distributed to the consumer?

The Three Basic Types of Business Organizations

The Sole Proprietorship: Grocery Shop The Partnership: CA’s, Architects, Lawyers The Corporation: Reliance, Infosys, Ideaforge,

Management

A process designed to achieve an organization’s objectives by using its resources effectively and efficiently in a changing environment.

The Functions of Management

Managers

Planning activities to achieve the

• rganization's
• bjectives

Organizing resources and activities to achieve the

• rganization’s
• bjectives

Staffing the

• rganization

with qualified people Directing employees’ activities toward achievement

• f objectives

Controlling the

• rganization’s

activities to keep it

• n course

Areas of Management

• Financial Management
• Production and Operations

Management

• Human Resources Management
• Marketing Management
• Administrative Management

Steps in the Management Decision Making Process

Recognize and Define the Decision Situation Develop Options Analyze Options Implement the Decision Monitor the Consequences Select the Best Option

The Reality of Management

There are Only Two Basic Activities

• f Management:
• 1. Figuring out what to do despite

uncertainty, great diversity, and an enormous amount of potentially relevant information, and,

• 2. Getting things done through a large

and diverse set of people despite having little direct control over most of them.

The Reality of Management

There are Only Two Basic Activities

• f Management:
• 1. Figuring out what to do despite

uncertainty, great diversity, and an enormous amount of potentially relevant information, and,

• 2. Getting things done through a large

and diverse set of people despite having little direct control over most of them.

The Transformation Process

Customer Control standards (Feedback) Inputs land labor capital raw materials time information energy Transformation

• r Conversion

procedures equipment facilities technology knowledge Outputs goods services ideas

Operations Management (OM)

The development and administration of the activities involved in transforming resources into goods and services.

The Steps in Planning and Designing Operations Systems

• 1. Planning the Product
• 2. Designing the Operations Process
• a. Standardization
• b. Modular Design
• c. Customization
• 3. Planning Capacity

The Steps in Planning and Designing Operations Systems

• 4. Planning Facilities
• a. Facility Location
• b. Facility layout
• 1. Fixed-Position Layout
• 2. Project Organization
• 3. Process Layout (intermittent
• rganizations)
• 4. Product Layout (continuous

manufacturing organization)

The Steps in Planning and Designing Operations Systems

• c. Technology

1. CAD 2. CAM 3. Flexible Manufacturing 4. CIM

Foxconn

• nn is

is the e larges est deployer loyer

• f robot
• bots in the

e world. ld.

Managing the Logistics of OM

Purchasing Management Inventory Control Management Routing and Scheduling Distribution Management

Managing the Logistics of OM

The objectives of “procurement”:

• 1. Buying the right items
• 2. Obtaining desired quality
• 3. Buying the right quantity
• 4. Paying the lowest price
• 5. Obtaining inventory at the right time

A Hypothetical PERT Diagram for Making a McDonald’s Big Mac

2 1 4 5 5 6 7 8 3 Remove ve buns, , 2 beef patties, ies, cheese, se, sauce sauce, , lettu tuce, ce,

• nions,

ns, pickle kle (20) Grill ll beef patties ies (120) Apply ly sauce to bun (10) Place cooked patties

• n bun

(5) Top with cheese and vegetables (15) Place Big Mac in package (5) Place package in heated bin (5) Serve to customer (5) Critical path Activity Event (185) Time to complete event (seconds) Start E n d

A Hypothetical PERT Diagram for Making a McDonald’s Big Mac

2 1 4 5 5 6 7 8 3 Remove ve buns, , 2 beef patties, ies, cheese, se, sauce sauce, , lettu tuce, ce,

• nions,

ns, pickle kle (20) Grill ll beef patties ies (120) Apply ly sauce to bun (10) Place cooked patties

• n bun

(5) Top with cheese and vegetables (15) Place Big Mac in package (5) Place package in heated bin (5) Serve to customer (5) Critical path Activity Event (185) Time to complete event (seconds) Start E n d

The Exchange Process: Giving Up One Thing in Return for Another

Something of Value

(money, credit, labor, goods)

Something of Value

(goods, services, ideas)

Seller Buyer

The value the customer derives is more than the price paid The price the producer derives is more than the cost incurred The nature of marketing is to create value by allowing people and organizations to

• btain what they need and want.

Exchange The act of giving up something (money, credit, labor, goods) in return for something else (goods, services,

• r ideas).

Marketing Creates Utility

Utility: A product’s ability to satisfy

human needs and wants.

• Place Utility
• Time Utility
• Ownership Utility
• Form Utility
• Buying
• Selling
• Transporting
• Storing
• Grading
• Financing
• Marketing Research
• Risk Taking

Functions of Marketing

The Marketing Concept

The idea that an organization should try to satisfy customer’s needs through coordinated activities that allow it to achieve its own goals (profit).

FAST FACT: Trying to determine a customer’s true needs is difficult because no one fully understands what motivates people to buy.

Developing Marketing Strategy

• Marketing Strategy:
• A plan of action for developing pricing, distributing

and promoting products that meet the needs of specific customers.

• The Two Major Components:
• Selecting a Target Market
• Developing the Appropriate Marketing Mix

A market is a group of people who have a need, purchasing power, and the desire and authority to spend money on goods, services, and ideas. A target market is a more specific group of consumers on whose needs and wants a company focuses its marketing efforts.

Market Focus

Market Segmentation: A strategy to divide the total market into groups of people who have relatively similar product needs.

A Market Segment: A collection of individuals, groups, or organizations who share one or more characteristics and have similar product needs and desires.

Niche Market Narrow market segment focus when efforts are on one small, well- defined segment that has a unique, specific set of needs.

Bases for Segmenting Markets

• Demographic
• Geographic
• Psychographic
• Behavioristic

Developing the Marketing Mix: Product, Price, Promotion, and Distribution

Customer

Promotion

Price Distribution

Product A good, service, or idea that has tangible and intangible attributes that provide satisfaction and benefit to consumers. A value placed

• n a product or

service that is exchanged between a buyer and seller. Making products available to consumers in the quantities and locations desired. A persuasive form

• f communication

that attempts to expedite a marketing exchange by influencing individuals and

• rganizations to

accept goods, services, and ideas.

Marketing Research & Information Systems

Marketing Research:

A systematic, objective process of getting customer information to guide marketing decisions.

Marketing Information System:

A framework for assessing information about customers from internal and external sources.

Primary Data Secondary Data

Buying Behavior

The decision processes and actions of people who purchase and use products. Psychological Variables Perception Motivation Learning Attitude Personality Social Variables Social Roles Reference Groups Social Classes Culture

Classifying Products

Consumer Products

Convenience Products Products bought frequently without a lengthy search and bought for immediate consumption. Shopping Products Products purchased after buyer has compared competitive products. Specialty Products Products that the buyer searches for and makes a special effort to obtain.

Industrial Products

Raw Materials Major Equipment Accessory Equipment Component Parts Processed Materials Supplies Industrial Services

Channels for Consumer Products

Producer

Agents (Middlemen) Wholesalers (Middlemen) Retailers (Middlemen)

Consumers Producer Producer Producer

Wholesalers (Middlemen) Retailers (Middlemen) Retailers (Middlemen)

Consumers Consumers Consumers

Physical Distribution

Mate terials ials Handling ing Transp sporta tation Warehousing sing

Consume umer Produc ucer

Inven ventory y Planning ing & Control trol

Developing New Products

Idea Developmen pment Scree eeni ning g New Ideas Commerci ercial alizati tion Busine ness Analysis Produc uct t Developmen pment Test Marketi ting

In 2015, 5, Tesla a spent ent $700 0 million lion on R&D.

Product Life Cycle

Introduction Growth Decline Maturity Sales Volume Profit

Time Sales

Building a New House

• Natural
• land, forests, etc. (not made by people)
• Material
• cement, steel, glass
• Human
• physical/mental abilities used by people to produce

goods and services

• Financial
• funds necessary to acquire needed

natural and human resources

• Time
• to build
• to use/deploy

Who Uses Accounting Information?

Tax authorities

Federal (IRS) State Municipal Other

Regulatory Agencies

SEC Stock exchanges ICC, FAA, etc. Other agencies

Economic Planners

Council of Economic Advisors Federal Reserve Board Government planners

Other groups

Employees and labor unions Financial advisors Customers and the general public

Management

Owners, partners Boards of directors Officers of the company Managers Department heads Supervisors

Those with Direct Financial Interest

Present or potential investors Present or potential creditors

Those with Indirect Financial Interest

Actions That Affect Business Activities

Business Activities Accounting The recording, measurement, and interpretation of financial information, often used in making business decisions.

The Nature of Accounting

The Income Statement

• A financial report that

shows an organization’s profitability over a period

• f time – month, quarter
• r year.
• Revenue
• Cost of Goods Sold
• Gross Income
• Expenses

– Selling, general & administrative – R&D, engineering – Interest

• Depreciation
• Net Income
• A “snapshot” of an
• rganization’s

financial position at a given moment.

• Assets
• Accounts

Receivable

• Liabilities
• Accounts Payable
• Accrued Expenses
• Owner’s Equity

The Balance Sheet

Business Model Canvas

Who will help you?

How do you do it? What do you need?

What do you do?

How do you interact? How do you reach them?

Who do you help? What will it cost? How much will you make?