1.

1​ ​Introduction​ ​ ​Business​ ​&​ ​Management

The​ ​Role​ ​of​ ​Business
The​ ​role​ ​of​ ​businesses​ ​in​ ​combining​ ​human,​ ​physical​ ​and​ ​financial​ ​resources​ ​to​ ​create​ ​goods​ ​and​ ​services
Business:​​ ​Is​ ​an​ ​organization​ ​involved​ ​in​ ​production​ ​of​ ​goods​ ​and​ ​services.​ ​They​ ​exist​ ​to​ ​satisfy​ ​the​ ​needs​ ​and​ ​wants
of​ ​people,​ ​the​ ​community,​ ​the​ ​customer.
- Goods=​ ​tangible Services=intangible
- Needs:​​ ​Basic​ ​necessities​ ​a​ ​person​ ​must​ ​have​ ​to​ ​survive​ ​ ​ex.​ ​Food,​ ​water,​ ​shelter
- Wants:​ ​People’s​ ​desires,​ ​what​ ​they​ ​want​ ​to​ ​have

Production​ ​Process Factors​ ​of​ ​Production

Inputs​ ​→​ ​Process​ ​→​ ​Outputs -​ ​Land -​ ​Labour
-​ ​Capital -​ ​Enterprise
Customers:​ ​Those​ ​who​ ​buy​ ​the​ ​product ​ ​Consumers​:​ ​Those​ ​who​ ​use​ ​the​ ​product

The​ ​Main​ ​Functions​ ​of​ ​Business

The​ ​main​ ​business​ ​functions​ ​and​ ​their​ ​roles.​ ​Interdependency.
Human​ ​Resources
Manages​ ​the​ ​personnel​ ​of​ ​an​ ​organization.​ ​Deals​ ​with​ ​recruitment,​ ​training​ ​,and​ ​appraisals​ ​among​ ​other​ ​things.

Finance​ ​and​ ​Accounts

Manages​ ​the​ ​organization’s​ ​money.​ ​Ensures​ ​that​ ​accurate​ ​recording​ ​and​ ​reporting​ ​of​ ​financial​ ​documentation​ ​takes
place​ ​to​ ​comply​ ​with​ ​legal​ ​requirements.

Marketing
Responsible​ ​for​ ​identifying​ ​and​ ​satisfying​ ​the​ ​needs​ ​and​ ​wants​ ​of​ ​customers.​ ​Ensures​ ​the​ ​organization's​ ​product​ ​sells
through​ ​market​ ​research,advertising​ ​etc.
- Four​ ​P’s
→​ ​Product
→​ ​Price
→​ ​Promotion
→​ ​Place

Operations
Converts​ ​raw​ ​material​ ​into​ ​finished​ ​goods,​ ​ready​ ​for​ ​sale​ ​and​ ​delivery.​ ​Also​ ​applies​ ​to​ ​the​ ​process​ ​of​ ​providing
services​ ​to​ ​customers​ ​ex.​ ​Hotels,​ ​restaurants.

Business​ ​Sectors
The​ ​nature​ ​of​ ​business​ ​activity​ ​in​ ​each​ ​sector​ ​and​ ​the​ ​impact​ ​of​ ​sectoral​ ​change​ ​on​ ​business​ ​activity

Primary​ ​Sector:​ ​Extraction​ ​of​ ​raw​ ​materials​ ​from​ ​the​ ​Earth.​ ​This​ ​extraction​ ​results​ ​in​ ​raw​ ​materials​ ​and​ ​basic​ ​foods.
- Coal,​ ​wool,​ ​iron.
- Farmers,​ ​coal​ ​miners

Primary​ ​sector​ ​accounts​ ​for​ ​a​ ​large​ ​percentage​ ​of​ ​the​ ​economy​ ​in​ ​LEDC’s​ ​(less​ ​economically​ ​developed​ ​countries).
Business​ ​in​ ​the​ ​PS​ ​in​ ​MEDCs​ ​use​ ​machinery​ ​and​ ​technology.

Secondary​ ​Sector:​ ​Manufacturing​ ​or​ ​construction​ ​of​ ​products

- Clothes,​ ​books,​ ​phones
- Clothes​ ​manufacturers,​ ​breweries,​ ​publishing​ ​firms
1.1​ ​Introduction​ ​ ​Business​ ​&​ ​Management
Economically​ ​developing​ ​countries​ ​=​ ​dominant​ ​secondary​ ​sector.
Economists​ ​argue​ ​it’s​ ​the​ ​wealth-creating​ ​sector​ ​due​ ​to​ ​ability​ ​to​ ​export​ ​+​ ​value​ ​add
Automation​ ​and​ ​mechanisation​ ​caused​ ​the​ ​decline​ ​in​ ​secondary​ ​sector​ ​employment

Tertiary​ ​Sector:​ ​Provide​ ​services​ ​to​ ​general​ ​population.​ ​Broken​ ​into​ ​quaternary​ ​and​ ​quinary
- Schools,​ ​retail,​ ​banks,​ ​hotels,​ ​health​ ​care,​ ​entertainment
MEDC​ ​=​ ​substantial​ ​tertiary​ ​sector

Quaternary:​ ​Knowledge​ ​based​ ​part​ ​of​ ​the​ ​economy

→​ ​Information​ ​technology →​ ​Media →​ ​Research​ ​&​ ​Development
→​ ​Consultation →​ ​Education

Quinary:​ ​Services​ ​which​ ​used​ ​to​ ​be​ ​done​ ​in​ ​the​ ​home
→​ ​Restaurants →​ ​Laundry →​ ​Babysitting

Sectoral​ ​Change
Shift​ ​in​ ​the​ ​relative​ ​share​ ​of​ ​national​ ​output​ ​and​ ​employment​ ​that​ ​is​ ​attributed​ ​to​ ​each​ ​business​ ​sector​ ​over​ ​time.

Sectoral​ ​Change​ ​in​ ​MEDC​ ​create​ ​opportunities​ ​in​ ​tertiary​ ​and​ ​quaternary​ ​sectors
→​ ​Higher​ ​household​ ​income
→​ ​More​ ​leisure​ ​time
→​ ​Greater​ ​focus​ ​on​ ​customer​ ​services
→​ ​Increasing​ ​reliance​ ​on​ ​support​ ​service

The​ ​role​ ​of​ ​entrepreneurship​ ​and​ ​intrapreneurship

Entrepreneurship:​ ​An​ ​individual​ ​who​ ​plans,​ ​organizes​ ​and​ ​manages​ ​a​ ​business,​ ​taking​ ​on​ ​financial​ ​risks​ ​in​ ​doing​ ​so.
→​ ​Search​ ​for​ ​and​ ​exploit​ ​business​ ​opportunities​ ​by​ ​forecasting​ ​and​ ​responding​ ​to​ ​changes​ ​in​ ​the
marketplace.

Intrapreneurship:​ ​The​ ​act​ ​of​ ​being​ ​an​ ​entrepreneur​ ​but​ ​as​ ​an​ ​employee​ ​within​ ​a​ ​large​ ​organization.​ ​Someone​ ​who​ ​is
independent,​ ​proactive,​ ​creative,​ ​and​ ​generates​ ​new​ ​ideas​ ​and​ ​innovations​ ​for​ ​the​ ​organization.

Reasons​ ​for​ ​starting​ ​up​ ​a​ ​business

G​rowth
E​arnings
T​ransference​ ​and​ ​inheritance
C​hallenge
A​utonomy
S​ecurity
H​obbies

Steps​ ​in​ ​the​ ​process​ ​of​ ​starting​ ​up​ ​a​ ​new​ ​business
1. Write​ ​a​ ​business​ ​plan
2. Obtain​ s​ tart​ ​up​ ​capital
a. Premises
Purchase​ ​costs,​ ​mortgage,​ ​rental​ ​deposits
b. Building
Alterations,​ ​fixtures​ ​and​ ​fittings,​ ​insurance
c. Capital​ ​equipment
1.1​ ​Introduction​ ​ ​Business​ ​&​ ​Management
Office​ ​furniture,​ ​telephones,​ ​computers
d. Legal​ ​and​ ​professional​ ​fees
Costs​ ​of​ ​solicitors
e. Marketing​ ​costs
Market​ ​research,​ ​ad​ ​campaigns
f. Human​ ​Resources
Recruitment,​ ​training​ ​costs
3. Obtain​ ​Business​ ​registration
4. Open​ ​a​ ​business​ ​bank​ ​account
5. Marketing

Factors​ ​to​ ​consider​ ​when​ ​setting​ ​up​ ​a​ ​business:

Business​ ​Idea:​ ​finding​ ​a​ ​niche
Human​ ​Resources:​ ​hiring,​ ​motivating​ ​staff
Enterprise:​ ​entrepreneurial​ ​skills,​ ​leadership​ ​and​ ​negotiation​ ​skills​ ​to​ ​deal
with​ ​stakeholders
Fixed​ ​Assets:​ ​premises,​ ​capital​ ​equipment,​ ​location
Legal​ ​Issues:​ ​consumer​ ​protection​ ​laws,​ ​copyright,​ ​patent

Problems​ ​that​ ​a​ ​new​ ​business​ ​may​ ​face

➔ Lack​ ​of​ ​Finance
◆ Purchase​ ​of​ ​fixed​ ​assets,​ ​no​ ​credentials​ ​for​ ​external​ ​funding
➔ ​ ​Cash​ ​Flow​ ​Problems
◆ Financing​ ​working​ ​capital​ ​(money​ ​for​ ​the​ ​daily​ ​running​ ​of​ ​a​ ​business),​ ​too​ ​much/little​ ​stock,​ ​ongoing
costs​ ​(rent,​ ​utility,​ ​taxes)
➔ Marketing
◆ Finding​ ​the​ ​niche
➔ Unestablished​ ​customer​ ​base
◆ Competitor​ ​loyal​ ​customers
➔ People​ ​management​ ​problems
◆ Lack​ ​of​ ​experience​ ​in​ ​hiring​ ​those​ ​with​ ​correct​ ​skills
➔ Legalities
◆ Tedious,​ ​time​ ​consuming,​ ​confusing,​ ​expensive.​ ​Oversight​ ​results​ ​in​ ​compensation​ ​or​ ​penalty​ ​fee
➔ Production​ ​problems
◆ Accurately​ ​forecast​ ​levels​ ​of​ ​demand,​ ​overproduction=​ ​waste,​ ​stockpiling,
underproduction=unhappy​ ​customers,​ ​loss​ ​of​ ​sales.
➔ High​ ​production​ ​costs
◆ Diseconomies​ ​of​ ​scale,​ ​machinery.
➔ Poor​ ​location
◆ Busy​ ​areas​ ​cost​ ​more,​ ​getting​ ​business​ ​seen​ ​and​ ​known
➔ External​ ​influences
◆ Economic​ ​recession,​ ​natural​ ​disaster

The​ ​elements​ ​of​ ​a​ ​business​ ​plan

Business​ ​Plan:​ ​A​ ​report​ ​detailing​ ​how​ ​a​ ​business​ ​sets​ ​out​ ​to​ ​achieve​ ​its​ ​goals​ ​and​ ​objectives.​ ​Viewed​ ​by​ ​financial
lenders,​ ​shareholders,​ ​potential​ ​investors.
→​ ​Executive​ ​summary:​ ​Summary​ ​of​ ​the​ ​information​ ​in​ ​the​ ​report,​ ​highlighting​ ​key​ ​points,​ ​and​ ​conclusions

Element Description
1.1​ ​Introduction​ ​ ​Business​ ​&​ ​Management
The​ ​Business - Name​ ​&​ ​Address
- Start​ ​up​ ​costs
- Details​ ​of​ ​owners​ ​and​ ​past​ ​business​ ​experience
- Type​ ​of​ ​business​ ​organization
- Goals​ ​and​ ​objectives

The​ ​Product - Goods/service​ ​being​ ​offered

- Evidence​ ​as​ ​to​ ​why​ ​customers​ ​would​ ​pay​ ​for​ ​it
- How​ ​production​ ​would​ ​take​ ​place
- Supplier​ ​resources
- Cost​ ​of​ ​production
- Pricing​ ​strategies

The​ ​Market - Expected​ ​number​ ​of​ ​customers,​ ​forecasted​ ​sales

- Nature​ ​&​ ​expected​ ​growth​ ​of​ ​the​ ​market
- Competitor​ ​analysis

The​ ​Finance - Proposed​ ​sources​ ​of​ ​finance

- Break​ ​even​ ​analysis
- Security​ ​(financial​ ​guarantees)
- Cash​ ​flow​ ​forecast​ ​and​ ​strategies​ ​for​ ​failure
- Forecast​ ​profit​ ​and​ ​loss​ ​for​ ​first​ ​year​ ​of​ ​trading
- Forecast​ ​rate​ ​of​ ​return

The​ ​Personnel - Number​ ​and​ ​job​ ​roles​ ​of​ ​employees

- Structure​ ​of​ ​human​ ​resources
- Details​ ​of​ ​payment​ ​scheme

The​ ​Marketing - Market​ ​research​ ​&​ ​test​ ​marketing

- Distribution​ ​plan​ ​(where​ ​products​ ​will​ ​be​ ​sold)
- Details​ ​of​ ​promotional​ ​mix
- Unique​ ​selling​ ​points​ ​to​ ​differentiate​ ​itself​ ​from​ ​rivals
1.2​ ​Types​ ​of​ ​Organizations
Private​ ​and​ ​Public​ ​Sectors
Distinction​ ​between​ ​private​ ​and​ ​public​ ​sectors
Public​ ​Sector​:​ ​Businesses​ ​owned​ ​and​ ​operated​ ​by​ ​the​ ​government​ ​on​ ​our​ ​behalf.
- Provide​ ​essential​ ​goods​ ​and​ ​services​ ​that​ ​would​ ​be​ ​under​ ​or​ ​inefficiently​ ​provided​ ​by​ ​the​ ​private​ ​sector
(emergency​ ​services,​ ​health​ ​care​ ​etc.)
- Wholly​ ​ ​owned​ ​by​ ​the​ ​government:​ ​state-owned​ ​enterprises​ ​(BBC)
Private​ ​Sector:​ ​Businesses​ ​owned​ ​by​ ​individuals,​ ​groups​ ​of​ ​individuals,​ ​or​ ​large​ ​number​ ​of​ ​investors
- Aim​ ​=​ ​make​ ​profeit​,​ ​positive​ ​difference​ ​between​ ​a​ ​firm’s​ ​sales​ ​revenue​ ​and​ ​costs.

3​ ​Main​ ​Legal​ ​Forms

Sole​ ​Trader:​ ​Individual​ ​who​ ​runs​ ​and​ ​owns​ ​a​ ​personal​ ​business.​ ​Owner​ ​is​ ​responsible​ ​for​ ​its​ ​success.​ ​Simplest
business​ ​structure​ ​Most​ ​common​ ​type​ ​of​ ​business​ ​ownership.​ ​Can​ ​be​ ​set​ ​up​ ​with​ ​little​ ​capital.
Advantages Disadvantages

Few​ ​legal​ ​formalities Unlimited​ ​liability

Profit​ ​taking Limited​ ​sources​ ​of​ ​finance

Being​ ​your​ ​own​ ​boss High​ ​Risks

Personalised​ ​service Workload​ ​and​ ​stress

Privacy Limited​ ​economies​ ​of​ ​scale

Lack​ ​of​ ​continuity

Partnership:​ ​Owned​ ​by​ ​2-20​ ​people.​ ​Financed​ ​from​ ​the​ ​personal​ ​funds​ ​of​ ​each​ ​owner​ ​or​ ​silent​ ​partners​ ​who​ ​do​ ​not
actively​ ​take​ ​part​ ​in​ ​the​ ​running​ ​of​ ​the​ ​partnership​ ​but​ ​have​ ​a​ ​financial​ ​stake.​ ​ ​Typically​ ​partners​ ​share​ ​the​ ​liability.
- Often​ ​formulate​ ​a​ ​legal​ ​agreement​ ​deed​ ​of​ ​partnership​ w ​ hich​ ​includes
- The​ ​amount​ ​of​ ​finance​ ​contributed​ ​by​ ​each​ ​partner​ ​&​ ​shares
- The​ ​roles,​ ​obligations​ ​and​ ​responsibilities​ ​of​ ​each​ ​partner
- How​ ​profits​ ​or​ ​losses​ ​will​ ​ ​be​ ​shared​ ​among​ ​the​ ​partners
- Conditions​ ​for​ ​introducing​ ​new​ ​partners
- Clauses​ ​for​ ​the​ ​withdrawal​ ​of​ ​a​ ​partner
- Procedures​ ​for​ ​ending​ ​the​ ​partnership
1.2​ ​Types​ ​of​ ​Organizations
Advantages Disadvantages

Financial​ ​Strength Unlimited​ ​Liability

Specialisation​ ​and​ ​division​ ​of​ ​labour Lack​ ​of​ ​continuity

Financial​ ​privacy Prolonged​ ​decision-making

Cost-effective Lack​ ​of​ ​harmony

Unlimited​ ​liability​ ​exists​ ​to​ ​prevent​ ​sole​ ​traders​ ​and​ ​partners​ ​from​ ​making​ ​careless​ ​decisions.​ ​Makes​ ​private
individuals​ ​accountable​ ​for​ ​their​ ​actions​ ​and​ ​decisions.​ ​However​ ​makes​ ​entrepreneurs​ ​take​ ​the​ ​safe​ ​route​ ​and​ ​not
take​ ​risks.

Companies​ ​(Corporations):​​ ​Businesses​ ​owned​ ​by​ ​shareholders.​ ​Sometimes​ ​called​ ​joint​ ​stock​ ​companies​ ​as​ ​shares​ ​are
held​ ​by​ ​numerous​ ​entities.
→​ ​Incorporated,​ ​there​ ​is​ ​a​ ​legal​ ​difference​ ​between​ ​the​ ​business​ ​and​ ​its​ ​owners.
→​ ​Limited​ ​liability,​ ​maximum​ ​they​ ​can​ ​lose​ ​is​ ​the​ ​value​ ​of​ ​the​ ​investment​ ​into​ ​their​ ​company.
→​ ​Board​ ​of​ ​Directors:​ ​A​ ​board​ ​of​ ​people​ ​elected​ ​by​ ​the​ ​shareholders​ ​to​ ​run​ ​the​ ​company​ ​on​ ​their​ ​behalf.
These​ ​can​ ​be​ ​internal​ ​or​ ​external​ ​people.​ ​Generally​ ​meet​ ​after​ ​each​ ​financial​ ​quarter.

Shareholders​:​ ​Individuals​ ​or​ ​other​ ​businesses​ ​which​ ​what​ ​invested​ ​money​ ​to​ ​provide​ ​capital​ ​for​ ​a​ ​company.
- Looking​ ​for​ ​dividends,​ ​share​ ​price​ ​to​ ​grow
Public​ ​Limited:​ ​Advertises​ ​and​ ​shares​ ​to​ ​the​ ​general​ ​public​ ​via​ ​stock​ ​exchange.
Ex.​ ​Coca-Cola,​ ​Nike,​ ​Porsche,​ ​Microsoft

Private​ ​Limited:​ ​Does​ ​not​ ​raise​ ​capital​ ​from​ ​general​ ​public.​ ​Shares​ ​are​ ​sold​ ​on​ ​a​ ​invite​ ​only​ ​basis,​ ​often​ ​to​ ​family​ ​or
friends.​ ​However​ ​this​ ​can’t​ ​be​ ​done​ ​without​ ​board​ ​of​ ​directors​ ​approval.
Ex.​ ​Chanel,​ ​LEGO,​ ​IKEA,​ ​Rolex

Legal​ ​Formalities
- Memorandum​ ​of​ ​Association​:​ ​brief​ ​document​ ​outlining​ ​name,​ ​purpose,​ ​registered​ ​address,​ ​and​ ​amount​ ​of
share​ ​capital​ ​invested.
- Articles​ ​of​ ​Association​:​ ​longer​ ​document​ ​showing​ ​internal​ ​regulations​ ​and​ ​procedures​ ​of​ ​the​ ​company​ ​(ex.
power​ ​of​ ​board​ ​and​ ​shareholders),​ ​as​ ​well​ ​as​ ​procedures​ ​for​ ​the​ ​Annual​ ​General​ ​Meeting,​ ​the​ ​process​ ​of
appointing​ ​directors,​ ​and​ ​how​ ​profits​ ​will​ ​be​ ​distributed.
- Once​ ​prior​ ​documents​ ​are​ ​completed​ ​a​ ​Certificate​ ​of​ ​Incorporation​ ​is​ ​issued​ ​to​ ​the​ ​company.​ ​It​ ​recognises
the​ ​business​ ​as​ ​a​ ​separate​ ​legal​ ​entity​ ​from​ ​its​ ​owners.

Flotation​:​ ​When​ ​a​ ​business​ ​first​ ​sells​ ​all​ ​or​ ​part​ ​of​ ​its​ ​business​ ​to​ ​investors,​ ​in​ ​an​ ​Initial​ ​Public​ ​Offering.​ T​ he​ ​IPO
makes​ ​the​ ​company​ ​listed​ ​on​ ​a​ ​stock​ ​exchange.​ ​Flotation​ ​helps​ ​to​ ​generate​ ​sources​ ​of​ ​finance.

Largest​ ​shareholders​ ​=​ ​institutional​ ​and​ ​commercial​ ​investors​ ​(companies​ ​w/​ ​shares​ ​in​ ​other​ ​companies).

Annual​ ​General​ ​Meeting:​ ​Allow​ ​owners​ ​to​ ​have​ ​a​ ​say​ ​in​ ​the​ ​running​ ​of​ ​a​ ​business
- Vote/​ ​re-election​ ​of​ ​members​ ​of​ ​a​ ​board
- Ask​ ​questions​ ​of​ ​Chief​ ​Executive​ ​Officer
- Approve​ ​the​ ​previous​ ​year’s​ ​financial​ ​accounts​ ​after​ ​directors​ ​present​ ​annual​ ​report
1.2​ ​Types​ ​of​ ​Organizations
Advantages Disadvantages

Raising​ ​finance Communication​ ​problems

Limited​ ​Liability Added​ ​complexities

Continuity Compliance​ ​costs

Economies​ ​of​ ​Scale Disclosure​ ​of​ ​information

Productivity Bureaucracy

Tax​ ​benefits Loss​ ​of​ ​control

For​ ​Profit​ ​Social​ ​Enterprises

Social​ ​Enterprises:​​ ​Revenue​ ​generating​ ​businesses​ ​with​ ​social​ ​objectives​ ​at​ ​the​ ​core​ ​of​ ​their​ ​operations.​ ​Can​ ​be​ ​non
for​ ​profit​ ​or​ ​for​ ​profit.
Main​ ​Goals
→​ ​Achieve​ ​social​ ​objectives
→​ ​Earn​ ​revenue​ ​in​ ​excess​ ​of​ ​costs

Cooperatives:​ ​For​ ​profit​ ​social​ ​enterprises​ ​owned​ ​and​ ​run​ ​by​ ​their​ ​members,​ ​such​ ​as​ ​employees​ ​or​ ​customers,​ ​with
the​ ​common​ ​goal​ ​of​ ​creating​ ​value​ ​for​ ​their​ ​members​ ​by​ ​operating​ ​in​ ​a​ ​socially​ ​responsible​ ​way.
→​ ​Cooperation​ ​not​ ​competitiveness.
→​ ​Cooperatives​ ​share​ ​any​ ​profits​ ​earned​ ​between​ ​their​ ​members
Consumer​ ​Cooperatives:​ ​owned​ ​by​ ​consumers​ ​who​ ​buy​ ​the​ ​goods​ ​or​ ​services
Ex.​ ​food,​ ​childcare,​ ​housing
Worker​ ​Cooperatives:​ ​set​ ​up,​ ​owned,​ ​and​ ​organized​ ​by​ ​their​ ​employee​ ​members.
Ex.​ ​cafes,​ ​tourism
Producer​ ​Cooperatives:​ ​People​ ​who​ ​support​ ​each​ ​other​ ​in​ ​the​ ​process​ ​or​ ​market​ ​of​ ​their​ ​product
Ex.​ ​Farmers​ ​who​ ​unite​ ​to​ ​buy​ ​equipment,​ ​or​ ​seeds​ ​in​ ​bulk​ ​to​ ​benefit​ ​from​ ​economies​ ​of​ ​scale.
Advantages Disadvantages

Incentives​ ​to​ ​work Disincentive​ ​effects

Decision-​ ​making​ ​power Limited​ ​sources​ ​of​ ​finance

Social​ ​Benefits Slower​ ​decision-making

Pubic​ ​Support Limited​ ​promotional​ ​opportunities

Microfinance​ ​Providers:​ ​Type​ ​of​ ​financial​ ​service​ ​aimed​ ​at​ ​entrepreneurs​ ​of​ ​small​ ​businesses,​ ​especially​ ​those​ ​on
lower​ ​income.
Ex.​ ​Kiva
Advantages Disadvantages

Accessibility Immorality

Job​ ​creation Limited​ ​finance

Social​ ​wellbeing Limited​ ​eligibility

1.2​ ​Types​ ​of​ ​Organizations

Public​ ​Private​ ​Partnerships​ ​(PPP)​ ​:​ ​Where​ ​a​ ​private​ ​sector​ ​entity​ ​partners​ ​with​ ​the​ ​government.​ ​Skills​ ​and​ ​assets​ ​of
each​ ​sector​ ​are​ ​shared​ ​in​ ​the​ ​delivery​ ​of​ ​the​ ​service​ ​or​ ​facility​ ​for​ ​the​ ​use​ ​of​ ​the​ ​general​ ​public.​ ​Ex.​ ​roads,​ ​tunnels
- A​ ​business​ ​is​ ​established​ ​to​ ​create​ ​the​ ​product
- At​ ​the​ ​end​ ​of​ ​the​ ​project​ ​it​ ​is​ ​owned​ ​by​ ​the​ ​government
- Money​ ​comes​ ​from​ ​investment​ ​companies​ ​or​ ​banks
Ex​ ​of​ ​projects:​ ​Sydney​ ​Harbour​ ​Tunnel,​ ​NY​ ​Central​ ​Park,​ ​HK​ ​Disneyland

Non-Profit​ ​social​ ​enterprises

Businesses​ ​run​ ​in​ ​a​ ​commercial​ ​like​ ​manner​ ​without​ ​profit​ ​as​ ​main​ ​goal.​ ​Non​ ​for​ ​profit:​ ​any​ ​excess​ ​profit​ ​is​ ​retained
in​ ​the​ ​business​ ​and​ ​put​ ​towards​ ​achieving​ ​social​ ​goals.
Ex.​ ​Libraries,​ ​state​ ​schools,​ ​museums,​ ​government​ ​hospitals.
​ ​ ​ ​ ​ ​ ​Amnesty​ ​International,​ ​Oxfam,​ ​Red​ ​Cross

Non-governmental​ ​organizations​ ​(NGO’s)

● ​ ​Operates​ ​in​ ​the​ ​private​ ​sector
● Though​ ​non-profit​ ​still​ ​employ​ ​thousands​ ​of​ ​people​ ​and​ ​handle​ ​huge​ ​budgets
● Set​ ​up​ ​and​ ​run​ ​for​ ​the​ ​benefit​ ​of​ ​others​ ​in​ ​society
→​ ​Operational​ ​NGOs​:​ ​established​ ​from​ ​a​ ​given​ ​objective​ ​or​ ​purpose,​ ​relief​ ​based​ ​community​ ​projects
Ex.​ ​Oxfam,​ ​Unicef

→​ ​Advocacy​ ​NGO’s:​ ​Take​ ​a​ ​more​ ​aggressive​ ​approach​ ​to​ ​promote​ ​or​ ​defend​ ​a​ ​cause,​ ​striving​ ​to​ ​raise
awareness​ ​through​ ​direct​ ​action.
Ex.​ ​Greenpeace,​ ​Amnesty​ ​International

Charities
● Provides​ ​voluntary​ ​support​ ​for​ ​good​ ​causes
● Use​ ​special​ ​marketing​ ​methods​ ​as​ ​they​ ​are​ ​not​ ​selling​ ​a​ ​product
● Some​ ​employees​ ​are​ ​paid​ ​for​ ​services,​ ​other​ ​are​ ​volunteers
Advantages Disadvantages

Social​ ​Benefits Bureaucracy

Tax​ ​exemptions​ ​for​ ​NPO’s Disincentive​ ​effects

Tax​ ​incentives​ ​for​ ​donors Charity​ ​fraud

Limited​ ​liability Inefficiencies

Public​ ​recognition​ ​and​ ​trust Limited​ ​sources​ ​of​ ​finance

1.3​ ​Organizational​ ​Objectives

Vision​ ​and​ ​Mission​ ​Statements

Vision​ ​Statement:​ ​An​ ​aspirational​ ​description​ ​of​ ​what​ ​an​ ​organization​ ​would​ ​like​ ​to​ ​achieve​ ​in​ ​the​ ​long​ ​term​ ​future.
Ex.​ ​To​ ​be​ ​the​ ​leading​ ​sportswear​ ​brand​ ​in​ ​the​ ​world.

Mission​ ​Statement:​ ​A​ ​written​ ​declaration​ ​of​ ​an​ ​organization’s​ ​core​ ​purpose​ ​and​ ​focus,​ ​it’s​ ​clearly​ ​defined​ ​and
realistically​ ​achievable.

Ex.​ ​"The​ ​Children's​ ​Center​ ​mission​ ​is​ ​to​ ​complement​ ​the​ ​service​ ​and​ ​education​ ​objectives​ ​of​ ​the​ ​university​ ​by:
-Providing​ ​education,​ ​care,​ ​and​ ​nurturing​ ​for​ ​the​ ​children​ ​of​ ​students,​ ​staff,​ ​faculty,​ ​and​ ​community​ ​members.
-Utilizing​ ​culturally​ ​and​ ​developmentally​ ​appropriate​ ​practices.​ ​-Serving​ ​as​ ​a​ ​role​ ​model​ ​of​ ​child​ ​care​ ​excellence​ ​for
the​ ​community​ ​at​ ​large."

Aims,​ ​objectives,​ ​strategies,​ ​and​ ​tactics

Aims:​​ ​What​ ​the​ ​business​ ​wants​ ​to​ ​achieve.​ ​Non​ ​time​ ​bound​ ​ ​goals​ ​of​ ​an​ ​organization.​ ​Broad,​ ​vague,​ ​and
unquantifiable​ ​statements.​ ​Set​ ​by​ ​senior​ ​leaders.
Ex.​ ​Provide​ ​high​ ​quality​ ​education​ ​to​ ​all

Objectives:​ ​Short​ ​to​ ​medium​ ​term​ ​specific​ ​and​ ​measurable​ ​targets​ ​and​ ​organization​ ​sets​ ​in​ ​order​ ​to​ ​achieve​ ​its​ ​aims.
Set​ ​by​ ​managers​ ​or​ ​subordinates.
Ex.​ ​To​ ​achieve​ ​a​ ​95%​ ​pass​ ​rate​ ​in​ ​two​ ​years

1. To​ ​measure​ ​and​ ​control

2. To​ m​ otivate
3. To​ d ​ irect

SMART​ ​Objectives:​ ​Specific,​ ​Measurable,​ ​Achievable,​ ​Realistic,​ ​Time​ ​constrained.

How​ ​a​ ​business​ ​plans​ ​to​ ​get​ ​where​ ​it​ ​wants​ ​to​ ​be​ ​:
Strategies:​ ​Plans​ ​of​ ​actions​ ​to​ ​achieve​ ​strategic​ ​objectives​ ​of​ ​an​ ​organization
Tactics:​ ​Short​ ​term​ ​methods​ ​used​ ​to​ ​achieve​ ​an​ ​organization's​ ​tactical​ ​objectives

- Operational​ ​Strategies:​ ​Day​ ​to​ ​day​ ​methods​ ​used​ ​to​ ​improve​ ​the​ ​efficiency​ ​of​ ​an​ ​organization.
- Generic​ ​Strategies:​ ​Those​ ​that​ ​affect​ ​the​ ​business​ ​as​ ​a​ ​whole
- Corporate​ ​Strategies:​ ​Targeted​ ​at​ ​the​ ​long​ ​term​ ​goals

Tactical​ ​Objectives:​ ​short​ ​term​ ​which​ ​affect​ ​a​ ​section​ ​of​ ​the​ ​organization.
Survival:​ ​new​ ​and​ ​unestablished​ ​businesses​ ​affected
Sales​ ​Revenue​ ​Maximisation:​ ​New​ ​business​ ​strive​ ​to​ ​maximize​ ​sales​ ​revenue​ ​to​ ​establish​ ​themselves​ ​in​ ​the
marketplace.

Strategic​ ​Objectives:​ ​Longer​ ​term​ ​goals​ ​of​ ​an​ ​organization

Profit​ ​Maximisation
Growth
Market​ ​Standing
Image​ ​and​ ​Reputation

Changing​ ​Objectives:​ ​Organizations​ ​change​ ​objectives​ ​and​ ​innovate​ ​in​ ​response​ ​to​ ​changes​ ​in​ ​internal​ ​and​ ​external
environments.
1.3​ ​Organizational​ ​Objectives
Internal:
- Corporate​ ​culture -​ ​Age​ ​of​ ​business
- Type​ ​and​ ​size​ ​of​ ​organization -​ ​Finance
- Private​ ​bersus​ ​public​ ​sector​ ​organizations -​ ​Risk​ ​profile
- Crisis​ ​management
External:
- State​ ​of​ ​the​ ​economy -​ ​Government​ ​constraints
- Presence​ ​and​ ​power​ ​of​ ​pressure​ ​groups -​ ​New​ ​technologies

Ethical​ ​Objectives
Ethical​ ​objectives​ ​and​ ​corporate​ ​social​ ​responsibility​ ​(CSR).

Ethics:​ ​Moral​ ​principles​ ​which​ ​guide​ ​decision​ ​making​ ​and​ ​strategy.

→​ ​ ​What’s​ ​considered​ ​right​ ​&​ ​wrong​ ​from​ ​society's​ ​point​ ​of​ ​view
→​ ​Pressure​ ​to​ ​act​ ​ethically​ ​can​ ​come​ ​from​ ​within​ ​or​ ​outside​ ​of​ ​a​ ​business
→​ ​Positive​ ​=​ ​retain​ ​good​ ​employees,​ ​build​ ​customer​ ​loyalty,​ ​avoid​ ​legal​ ​problems
ex.reduce​ ​pollution​ ​using​ ​environmentally​ ​friendly​ ​products,​ ​increased​ ​recycling,​ ​rest​ ​breaks​ ​for​ ​staff
→​ ​Negative​ ​=​ ​company​ ​credibility,​ ​legal​ ​issues,​ ​employee​ ​performance
Ex.​ ​environmental​ ​neglect,​ ​exploitation​ ​of​ ​consumers,​ ​financial​ ​dishonesty

Socially​ ​responsible​ ​businesses​ ​act​ ​ethically​ ​towards​ ​their​ ​stakeholders

Attitudes​ ​towards​ ​businesses​ ​corporate​ ​social​ ​responsibility:

➢ Self​ ​interest​ ​attitude
○ Governments​ ​not​ ​businesses​ ​are​ ​responsible​ ​for​ ​solving​ ​social​ ​problems
➢ Altruistic​ ​attitude
○ Do​ ​what​ ​they​ ​can​ ​to​ ​improve​ ​society​ ​and​ ​willing​ ​to​ ​donate​ ​money​ ​to​ ​charity​ ​regardless​ ​of​ ​whether
actions​ ​help​ ​increase​ ​profits
➢ Strategic​ ​Attitude
○ Businesses​ ​ought​ ​to​ ​be​ ​socially​ ​responsible​ ​only​ ​is​ ​such​ ​actions​ ​help​ ​them​ ​to​ ​become​ ​more​ ​socially
profitable

To​ ​help​ ​with​ ​this​ ​businesses​ ​put​ ​an​ ​ethical​ ​code​ ​of​ ​practice​ ​in​ ​annual​ ​report​ ​which​ ​outlines​ ​documented​ ​beliefs​ ​and
philosophies​ ​of​ ​the​ ​business,​ ​guidelines​ ​on​ ​employee​ ​behavior​ ​etc.

The​ ​reasons​ ​why​ ​organizations​ ​set​ ​ethical​ ​objectives​ ​and​ ​the​ ​impact​ ​of​ ​implementing​ ​them

Advantages Limitation

Improved​ ​corporate​ ​image Compliance​ ​Costs

Increased​ ​customer​ ​loyalty Lower​ ​profits

Cost​ ​cutting Stakeholder​ ​conflict

Improved​ ​staff​ ​morale​ ​and​ ​motivation Ethics​ ​and​ ​CSR​ ​are​ ​subjective
The​ ​evolving​ ​role​ ​and​ ​nature​ ​of​ ​CSR.

→​ ​Attitudes​ ​towards​ ​CSR​ ​change​ ​over​ ​time​ ​with​ ​what​ ​society​ ​seems​ ​acceptable
1.3​ ​Organizational​ ​Objectives
→​ ​Changes​ ​from​ ​country​ ​to​ ​country​ ​depending​ ​on​ ​ethics

→​ ​Subjective​ ​as​ ​based​ ​on​ ​public​ ​opinion​ ​which​ ​changes​ ​over​ ​time

→​ ​Links​ ​with​ ​pressure​ ​groups​ ​pushing​ ​for​ ​change

→​ ​Ex.​ ​more​ ​women​ ​in​ ​workforce,​ ​multiculturalism​ ​in​ ​schools,​ ​tobacco​ ​policies​ ​in​ ​different​ ​countries

The​ ​evolving​ ​nature​ ​of​ ​CSR​ ​means​ ​that​ ​businesses​ ​must​ ​adapt​​ ​to​ ​meet​ ​their​ ​social​ ​responsibilities
Examples:​ ​Providing​ ​accurate​ ​labeling,​ ​fair​ ​employee​ ​practices,​ ​consideration​ ​for​ ​environment,​ ​community
work

Weather​ ​or​ ​not​ ​businesses​ ​act​ ​socially​ ​responsible:

- Involvement,​ ​influence,​ ​and​ ​power​ ​of​ ​stakeholders​ ​and​ ​pressure​ ​groups
- Corporate​ ​culture​ ​and​ ​attitudes​ ​towards​ ​CSR
- Societal​ ​expectations
- Exposure​ ​and​ ​pressure​ ​from​ ​the​ ​media
- Experience
- Compliance​ ​costs
- Laws​ ​and​ ​Regulations

SWOT​ ​analysis​ ​of​ ​a​ ​given​ ​organization

SWOT​ ​Analysis:​ ​Analytical​ ​tool​ ​used​ ​to​ ​assess​ ​the​ ​internal​ ​strengths​ ​and​ ​weakness​ ​and​ ​the​ ​external​ ​opportunities
and​ ​threats​ ​of​ ​a​ ​business​ ​decision,​ ​issue​ ​or​ ​problem.

Can​ ​be​ ​used​ ​for:

→​ ​Competitor​ ​analysis →​ ​Assessing​ ​opportunities →​ ​Risk​ ​assessment

→​ ​Reviewing​ ​corporate​ ​strategy →​ ​Strategic​ ​planning

Advantages Disadvantages

Simple​ ​and​ ​Quick Simplistic​ ​and​ ​doesn't​ ​demand​ ​detailed​ ​analysis

Wide​ ​range​ ​of​ ​applications Model​ ​is​ ​static​ ​but​ ​business​ ​environment​ ​is​ ​changing

Helps​ ​determine​ ​position​ ​in​ ​market​ ​and​ ​aids​ ​in​ ​formulation​ ​of Only​ ​useful​ ​if​ ​decision​ ​makers​ ​are​ ​open​ ​about​ ​weaknesses
business​ ​strategy and​ ​willing​ ​to​ ​act​ ​on​ ​them

Encourages​ ​foresight​ ​and​ ​proactive​ ​thinking​ ​and​ ​decision Not​ ​used​ ​in​ ​isolation
making

Reduce​ ​risks​ ​of​ ​decision​ ​making​ ​by​ ​demanding​ ​objective​ ​and

logical​ ​thought​ ​processes

Ansoff​ ​matrix​ ​for​ ​different​ ​growth​ ​strategies​ ​of​ ​a​ ​given​ ​organization

Ansoff​ ​Matrix:​ ​Analytical​ ​tool​ ​that​ ​helps​ ​managers​ ​choose​ ​and​ ​devise​ ​various​ ​products​ ​and​ ​growth​ ​strategies.
1.3​ ​Organizational​ ​Objectives

Low​ ​-​ ​High​ ​Risk

1-​ ​Market​ ​Penetration

2-​ ​Product​ ​Development

3-​ ​Market​ ​Development

4-​ ​Diversification

Market​ ​Penetration:​ ​Low​ ​risk​ ​growth​ ​strategy​ ​focusing​ ​on​ ​selling​ ​existing​ ​products​ ​in​ ​existing​ ​markets​ ​to​ ​increase
market​ ​share​ ​of​ ​current​ ​products.

→​ ​Achieved​ ​through​ ​more​ ​competitive​ ​prices,​ ​improved​ ​advertising​ ​customer​ ​loyalty​ ​schemes.

→​ ​Less​ ​market​ ​research​ ​needed

→​ ​Once​ ​existing​ ​market​ ​is​ ​saturated​ ​alternative​ ​strategies​ ​required.

Product​ ​Development​ ​:​ ​Medium​ ​risk​ ​growth​ ​strategy​ ​that​ ​involves​ ​selling​ ​new​ ​products​ ​in​ ​existing​ ​markets.

→​ ​Relies​ ​heavily​ ​on​ ​product​ ​extension​ ​strategies​ ​&​ ​brand​ ​development​ ​to​ ​appeal​ ​to​ ​existing​ ​market

→​ ​Well​ ​established​ ​brands​ ​can​ ​release​ ​new​ ​products​ ​with​ ​fewer​ ​risks

→​ ​Also​ ​a​ ​reason​ ​to​ ​acquire​ ​other​ ​companies.

Market​ ​Development:​ ​Medium​ ​risk​ ​growth​ ​strategy​ ​which​ ​involves​ ​selling​ ​existing​ ​products​ ​in​ ​new​ ​markets.

→​ ​Can​ ​be​ ​achieved​ ​through​ ​changing​ ​target​ ​audiences,​ ​or​ ​globalizing

→​ ​Prices​ ​may​ ​change​ ​to​ ​attract​ ​different​ ​market​ ​segments

→​ ​Advantage​ ​that​ ​firm​ ​is​ ​already​ ​familiar​ ​with​ ​product​ ​being​ ​marketed,​ ​Disadvantage​ ​that​ ​new​ ​markets​ ​can​ ​be​ ​risky

Diversification:​ ​High-risk​ ​growth​ ​strategy​ ​involving​ ​selling​ ​new​ ​products​ ​in​ ​new​ ​markets

→​ ​Suitable​ ​for​ ​firms​ ​which​ ​have​ ​reached​ ​saturation​ ​and​ ​seeking​ ​new​ ​opportunities​ ​for​ ​growth

Holding​ ​Company:​ ​Business​ ​that​ ​owns​ ​controlling​ ​interest​ ​in​ ​other​ ​diverse​ ​countries.​ ​Benefit​ ​from​ ​having
presence​ ​in​ ​a​ ​large​ ​range​ ​of​ ​markets​ ​in​ ​different​ ​regions​ ​in​ ​the​ ​world

Subsidiaries:​ ​Firms​ ​owned​ ​by​ ​a​ ​holding​ ​company.

→​ ​Related​ ​Diversification:​ ​Catering​ ​for​ ​new​ ​customers​ ​within​ ​the​ ​broader​ ​confines​ ​of​ ​the​ ​same​ ​industry

→​ ​Unrelated​ ​Diversification:​ ​Selling​ ​new​ ​products​ ​in​ ​untapped​ ​markets.

1.4​ ​Stakeholders
Stakeholder:​ ​Any​ ​individual​ ​or​ ​group​ ​with​ ​a​ ​direct​ ​interest​ ​in,​ ​and​ ​is​ ​affected​ ​by,​ ​the​ ​activities​ ​and
performance​ ​of​ ​a​ ​business.

Interests​ ​of​ ​internal​ ​stakeholders

Internal​ ​stakeholders​ ​are​ ​members​ ​of​ ​an​ ​organization.

Internal​ ​Stakeholder Interests/​ ​Priorities How​ ​can​ ​they​ ​impact​ ​the

organization

Employees Interest Employees​ ​are​ ​a​ ​big​ ​part​ ​of​ ​what

Staff​ ​of​ ​a​ ​business
→​ ​increase​ ​their​ ​financial​ ​benefits keeps​ ​and​ ​organization​ ​running,​ ​if
and​ ​pay staff​ ​are​ ​unhappy​ ​then​ ​they​ ​are
→​ ​working​ ​conditions unlikely​ ​to​ ​produce​ ​good​ ​quality
→​ ​job​ ​security products/service.
→​ ​opportunities​ ​for​ ​career
progression

Priorities
→​ ​short​ ​term​ ​paychecks
→​ ​interested​ ​in​ ​moving​ ​to​ ​more
senior​ ​positions.

Managers​ ​&​ ​Board​ ​of
Directors
People​ ​who​ ​oversee​ ​the​ ​daily
activities​ ​of​ ​a​ ​business
Senior​ ​executives​ ​who​ ​have
been​ ​elected​ ​by​ ​the
company's​ ​shareholders​ ​to
direct​ ​business​ ​operations​ ​on
behalf​ ​of​ ​their​ ​owners
Interest They​ ​make​ ​all​ ​the​ ​more​ ​senior
→​ ​maximize​ ​their​ ​own​ ​benefits,​ ​such decisions​ ​which​ ​can​ ​have​ ​an​ ​impact
as​ ​annual​ ​bonuses on​ ​all​ ​sectors​ ​and​ ​members​ ​of​ ​the
→​ ​Please​ ​shareholders​ ​so​ ​they​ ​can company.
keep​ ​their​ ​positions​ ​of​ ​seniority.
Priority
→​ ​profit​ ​maximization
→​ ​long​ ​time​ ​financial​ ​health
→​ ​good​ ​corporate​ ​image

Shareholders​ ​(stockholders)
Owner​ ​of​ ​shares​ ​in​ ​a
company
Interest​ ​&​ ​Priority Voting​ ​rights​ ​and​ ​a​ ​say​ ​in​ ​how​ ​the
→​ ​To​ ​maximize​ ​dividends company​ ​is​ ​run
→​ ​Minimize​ ​expenditure
→​ ​To​ ​achieve​ ​a​ ​capital​ ​gain​ ​in​ ​the Power​ ​to​ ​elect​ ​those​ ​in​ ​positions​ ​of
value​ ​of​ ​shares,​ ​i.e.​ ​a​ ​rise​ ​in​ ​the​ ​share power
price.

Common​ ​interest​ ​of​ ​internal​ ​stakeholders:​ ​Internal​ ​stakeholders​ ​all​ ​want​ ​the​ ​company​ ​to​ ​succeed.​ ​They​ ​all​ ​want​ ​a
company​ ​to​ ​make​ ​money​ ​and​ ​be​ ​profitable

Interests​ ​of​ ​external​ ​stakeholders

Do​ ​not​ ​form​ ​part​ ​of​ ​the​ ​business​ ​but​ ​have​ ​a​ ​direct​ ​interest​ ​or​ ​involvement​ ​in​ ​the​ ​organization
1.4​ ​Stakeholders
External​ ​Stakeholders Interests​ ​/​ ​Priorities How​ ​they​ ​can​ ​impact​ ​the
organization

Customers Interest Business​ ​pay​ ​attention​ ​to​ ​the​ ​needs

→​ ​is​ ​in​ ​getting​ ​the​ ​best​ ​quality​ ​for and​ ​wants​ ​of​ ​their​ ​customers​ ​as
Those​ ​who​ ​buy​ ​products/​ ​services the​ ​best​ ​price they​ ​are​ ​how​ ​they​ ​make​ ​their
money.
Priorities
→​ ​Good​ ​company​ ​image Want​ ​to​ ​keep​ ​happy​ ​and​ ​loyal
→​ ​Good​ ​quality customers
→​ ​Good​ ​prices

Suppliers Interest Organizations​ ​need​ ​the​ ​materials/

Provide​ ​a​ ​business​ ​with​ ​stocks​ ​of
raw​ ​materials,​ ​component​ ​parts,
and​ ​finished​ ​goods​ ​needed​ ​for
production.
​ ​→​ ​maintaining​ ​regular​ ​contacts
with​ ​clients​ ​at​ ​competitive​ ​prices
→​ ​organizations​ ​paying​ ​outstanding
bills​ ​on​ ​time.
Priorities
→​ ​Suppliers​ ​profitability​ ​is
depended​ ​on​ ​businesses​ ​success.
services​ ​to​ ​make​ ​their​ ​product​ ​or
service.
Businesses​ ​want​ ​a​ ​good​ ​working
relationship​ ​with​ ​suppliers​ ​to
receive​ ​stock​ ​on​ ​time​ ​and​ ​at
reasonable​ ​prices​ ​with​ ​potential​ ​for
credit​ ​terms

Pressure​ ​Groups
Consist​ ​of​ ​individuals​ ​with​ ​a
common​ ​interest​ ​who​ ​seek​ ​to​ ​place
demands​ ​on​ ​organizations​ ​to​ ​act​ ​in
a​ ​particular​ ​way​ ​or​ ​to​ ​change​ ​their
behavior
Interest​ ​&​ ​Priority
→​ ​decisions​ ​made​ ​by​ ​businesses
which​ ​affect​ ​society​ ​on​ ​the​ ​whole
→​ ​helping​ ​things​ ​like​ ​the
environment,​ ​local​ ​jobs,​ ​workers
rights​ ​etc.
Pressure​ ​groups​ ​can​ ​have​ ​an​ ​impact
on​ ​brand​ ​image​ ​and​ ​brand​ ​value.
They​ ​can​ ​directly​ ​bring​ ​about
change​ ​through​ ​company​ ​policy,​ ​or
indirectly​ ​by​ ​influencing
government​ ​policy.

Local​ ​Community Interest​ ​&​ ​Priority Can​ ​complain​ ​to​ ​local​ ​government
→​ ​Good​ ​employer which​ ​affects​ ​business.
→​ ​ ​non-polluting
→​ ​ ​social​ ​responsibility Opportunity​ ​to​ ​spread​ ​bad​ ​press​ ​by
→​ ​good​ ​corporate​ ​image word​ ​of​ ​mouth

Government Interest​ ​&​ ​Priority Government​ ​has​ ​the​ ​power​ ​to

→​ ​meet​ ​taxes​ ​&​ ​follows​ ​legislation
→​ ​ ​provides​ ​jobs
→​ ​health​ ​safety​ ​standards​ ​are​ ​met,
→​ ​customer​ ​protection​ ​laws​ ​are
upheld.
stimulate​ ​business​ ​activity​ ​by
altering​ ​interest​ ​rates​ ​/​ ​tax​ ​to​ ​create
employment​ ​and​ ​investment
opportunities.

Competitors Interest​ ​&​ ​Priority To​ ​remain​ ​competitive​ ​businesses

1.4​ ​Stakeholders
Rival​ ​business​ ​of​ ​an​ ​organization
→​ ​ ​benefit​ ​from​ ​competition​ ​as​ ​it
can​ ​create​ ​incentive​ ​to​ ​be
innovative​ ​and​ ​create​ ​new​ ​products
→​ ​Competitors​ ​future​ ​financial
plans
must​ ​stay​ ​aware​ ​and​ ​respond​ ​to​ ​the
practices​ ​of​ ​their​ ​rivals
Can​ ​be​ ​used​ ​to​ ​benchmark
performance

Why​ ​firms​ ​are​ ​concerned​ ​with​ ​its​ ​stakeholders? Firms​ ​often​ ​ignore​ ​stakeholders​ ​when:
- Attract​ ​more​ ​investors -​ ​In​ ​survival​ ​mode
- Easier​ ​to​ ​attract​ ​good​ ​employees -​ ​Maximum​ ​short​ ​term​ ​profits
- Better​ ​government​ ​co-operation

Possible​ ​areas​ ​of​ ​mutual​ ​benefit​ ​and​ ​conflict

between​ ​stakeholders’​ ​interests
Stakeholder​ ​Conflict
Conflicts​ ​arise​ ​because​ ​a​ ​business​ ​cannot​ ​simultaneously​ ​meet
the​ ​needs​ ​of​ ​all​ ​its​ ​stakeholders.

Stakeholder​ ​Mapping:​ ​Model​ ​that​ ​assess​ ​relative​ ​interest​ ​and

power​ ​(influence)​ ​of​ ​various​ ​stakeholders.​ ​Helps​ ​businesses
prioritise​ ​their​ ​actions.

Often​ ​a​ ​company​ ​will​ ​look​ ​at​ ​its​ ​aims​ ​and​ ​objectives​ ​to​ ​decide
which​ ​stakeholders​ ​to​ ​address.

Examples:
● Shareholders​ ​(​ ​short​ ​term​ ​)​ ​VS.​ ​Managers​ ​&​ ​BOD​ ​(​ ​long​ ​term)
● Shareholders​ ​(​ ​more​ ​profit​ ​)​ ​VS.​ ​Employees​ ​(​ ​need​ ​jobs​ ​)
● Suppliers​ ​(​ ​single​ ​transaction​ ​full​ ​price​ ​)​ ​VS.​ ​Business​ ​(​ ​discounts​ ​for​ ​large​ ​quantities​ ​)
● Shareholders​ ​(​ ​overpaid​ ​top​ ​management​ ​)​ ​VS.​ ​Management​ ​(​ ​adequate​ ​pay​ ​for​ ​more​ ​risk​ ​job​ ​)

Mutual​ ​Benefit​ ​of​ ​Stakeholder​ ​Interest

Benefits​ ​exist​ ​in​ ​simultaneously​ ​addressing​ ​the​ ​needs​ ​of​ ​different​ ​stakeholders.​ ​This​ ​is​ ​generally​ ​achieved​ ​in​ ​the
medium​ ​to​ ​long​ ​term.

Example:
1. Addressing​ ​needs​ ​of​ ​employees​ ​and​ ​managers​ ​→​ ​highly​ ​motivated​ ​+​ ​productive​ ​workforce
2. Low​ ​rates​ ​of​ ​absenteeism​ ​+​ ​staff​ ​turnover
3. Improved​ ​customer​ ​relations​ ​+​ ​corporate​ ​image​ ​+​ ​market​ ​share​ ​+​ ​profits
4. Happy​ ​shareholders
5. Greater​ ​output​ ​→​ ​more​ ​employment​ ​in​ ​local​ ​community
1.5​ ​External​ ​Environment
STEEPLE​ ​Analysis
STEEPLE​ ​analysis​ ​of​ ​a​ ​given​ ​organization
Consequences​ ​of​ ​a​ ​change​ ​in​ ​any​ ​of​ ​the​ ​STEEPLE​ ​factors​ ​for​ ​a​ ​business’s​ ​objectives​ ​and​ ​strategy

STEEPLE:​ ​Acronym​ ​for​ ​S​ocial,​ ​T​echnological,​ ​E​conomic,​ ​E​nvironmental,​ ​P​olitical,​ ​L​egal,​ ​and​ ​E​thical​ ​opportunities​ ​and
threats​ ​of​ ​the​ ​external​ ​business​ ​environment.
→​ ​Affect​ ​all​ ​businesses​ ​but​ ​are​ ​beyond​ ​control​ ​of​ ​individual​ ​organizations
→​ ​Opportunities:​ ​External​ ​factors​ ​that​ ​present​ ​chances,​ ​ex.​ ​tax​ ​rates,​ ​lower​ ​interest​ ​rates
→​ ​Threats:​ ​External​ ​factors​ ​that​ ​can​ ​harm​ ​a​ ​business,​ ​ex.​ ​Recession,​ ​major​ ​road​ ​works
→​ ​Used​ ​to​ ​examine​ ​advantages​ ​and​ ​disadvantages​ ​of​ ​a​ ​decision,​ ​logical​ ​analysis
→​ ​Easy​ ​to​ ​use →​ ​Useful​ ​as​ ​a​ ​brainstorming​ ​and​ ​discussion​ ​tool

Example:

Social:

Opportunities:​ ​Replacing​ ​old​ ​machinery​ ​would​ ​result​ ​in​ ​better​ ​working​ ​conditions​ ​for​ ​employees​ ​and​ ​make​ ​residents
more​ ​satisfied.​ ​The​ ​better​ ​machinery​ ​would​ ​make​ ​workers​ ​jobs​ ​easier​ ​and​ ​more​ ​efficient.​ ​The​ ​residents​ ​would​ ​be
satisfied​ ​as​ ​the​ ​new​ ​machinery​ ​will​ ​be​ ​more​ ​environmentally​ ​friendly.​ ​Stakeholders​ ​would​ ​see​ ​the​ ​positive​ ​social
responsibility​ ​of​ ​the​ ​business​ ​and​ ​more​ ​people​ ​would​ ​be​ ​interested​ ​in​ ​the​ ​business​ ​which​ ​could​ ​increase​ ​profits.

Threats:​ ​Current​ ​working​ ​conditions​ ​and​ ​low​ ​salaries​ ​may​ ​cause​ ​employees​ ​to​ ​leave​ ​the​ ​company.​ ​This​ ​is​ ​a​ ​threat​ ​for
the​ ​company​ ​as​ ​the​ ​hiring​ ​of​ ​new​ ​employees​ ​is​ ​an​ ​expensive​ ​and​ ​time​ ​consuming​ ​process

Environmental:

Opportunities:​ ​the​ ​purchasing​ ​of​ ​new​ ​machinery​ ​will​ ​enable​ ​the​ ​use​ ​of​ ​recycled​ ​materials.​ ​this​ ​is​ ​an​ ​opportunity​ ​for
the​ ​business​ ​as​ ​it​ ​shows​ ​environmental​ ​awareness​ ​and​ ​would​ ​satisfy​ ​stakeholders​ ​(because......)

Threats:​ ​new​ ​machinery​ ​is​ ​very​ ​expensive​ ​and​ ​if​ ​they​ ​don't​ ​meet​ ​a​ ​certain​ ​level​ ​of​ ​production​ ​the​ ​company​ ​could​ ​lose
a​ ​lot​ ​of​ ​money​ ​if​ ​they​ ​don't​ ​meet​ ​the​ ​production​ ​requirements​ ​needed​ ​to​ ​make​ ​a​ ​profit​ ​out​ ​of​ ​the​ ​new​ ​machines.

Legal:

Opportunities:​ ​purchasing​ ​new​ ​machinery​ ​or​ ​moving​ ​to​ ​an​ ​industrial​ ​area​ ​would​ ​mean​ ​the​ ​business​ ​will​ ​be​ ​able​ ​to
expand.​ ​Local​ ​residents​ ​would​ ​no-longer​ ​consider​ ​taking​ ​legal​ ​action​ ​as​ ​the​ ​levels​ ​of​ ​noise​ ​and​ ​pollution​ ​will
significantly​ ​improve​ ​therefore​ ​avoiding​ ​legal​ ​action.

Threats:​ ​The​ ​current​ ​working​ ​conditions​ ​of​ ​employees​ ​can​ ​be​ ​questioned​ ​and​ ​some​ ​may​ ​consider​ ​taking​ ​legal​ ​action.
Local​ ​residents​ ​are​ ​unhappy​ ​with​ ​the​ ​current​ ​situation​ ​of​ ​the​ ​business​ ​and​ ​are​ ​also​ ​considering​ ​taking​ ​legal​ ​action.
This​ ​is​ ​a​ ​threat​ ​to​ ​the​ ​business​ ​as​ ​it​ ​is​ ​a​ ​very​ ​time​ ​consuming​ ​and​ ​expensive​ ​process​ ​which​ ​would​ ​cost​ ​them​ ​a​ ​lot​ ​of
money.

Social​ ​Opportunities​ ​and​ ​Threats

The​ ​values​ ​and​ ​attitudes​ ​of​ ​society​ ​towards​ ​a​ ​wide​ ​range​ ​of​ ​different​ ​issues​ ​(ex.​ ​Business​ ​ethics,​ ​social​ ​welfare,
women,​ ​religion,​ ​animal​ ​rights)​ ​can​ ​present​ ​both​ ​opportunities​ ​ ​and​ ​threats​ ​for​ ​businesses
❖ Environment:​ ​Growing​ ​support​ ​of​ ​environment​ ​lead​ ​businesses​ ​to​ ​report​ ​on​ ​non​ ​financial​ ​aspects​ ​like​ ​waste
management
❖ Multiculturalism:​ ​Increased​ ​awareness​ ​and​ ​acceptance​ ​of​ ​migration​ ​and​ ​other​ ​cultures​ ​creates​ ​more​ ​choice
for​ ​customers.​ ​Ex.​ ​take​ ​out​ ​food​ ​popular​ ​other​ ​countries
❖ Ethical:​ ​Social​ ​pressures​ ​to​ ​act​ ​ethically​ ​often​ ​results​ ​in​ ​higher​ ​costs
❖ Demographic:​ ​Demographic​ ​changes​ ​affect​ ​marketing​ ​strategy,​ ​and​ ​products​ ​supplied
1.5​ ​External​ ​Environment
Technological​ ​Opportunities​ ​and​ ​Threats
Advancement​ ​in​ ​technology​ ​improved​ ​productivity​ ​but​ ​increases​ ​cost​ ​in​ ​staying​ ​up​ ​to​ ​date​ ​with​ ​tech​ ​progress.
Technology​ ​affects​ ​all​ ​aspects​ ​of​ ​business​ ​function
Opportunities:
❖ New​ ​working​ ​practices:​ ​working​ ​from​ ​home,​ ​video​ ​conferences
❖ Increased​ ​productivity​ ​and​ ​efficiency​ ​gains:​ ​robots​ ​-​ ​large​ ​initial​ ​costs​ ​but​ ​benefits​ ​in​ ​long​ ​run
❖ Quicker​ ​cheaper​ ​ ​product​ ​development​ ​time​ ​-​ ​e​ ​commerce
❖ Job​ ​creation
❖ New​ ​products​ ​and​ ​new​ ​markets
❖ Reduced​ ​language​ ​and​ ​culture​ ​briers
❖ Overcome​ ​geographical​ ​limitations

Threats:
❖ Not​ ​always​ ​reliable​ ​and​ ​secure​ ​-​ ​online​ ​crime
❖ Shorter​ ​product​ ​life​ ​cycles,​ ​what’s​ ​new​ ​gets​ ​old​ ​quick
❖ Can​ ​be​ ​very​ ​costly​ ​-​ ​training​ ​staff​ ​to​ ​work​ ​tech,​ ​repairing​ ​and​ ​buying​ ​tech
❖ Job​ ​losses​ ​-​ ​all​ ​sectors
❖ Price​ ​transparency​ ​-​ ​customers​ ​can​ ​easily​ ​compare​ ​prices
❖ Reduced​ ​productivity​ ​-​ ​workers​ ​using​ ​social​ ​media

When​ ​adopting​ ​technology​ ​managers​ ​should​ ​consider:​ ​costs,​ ​benefits,​ ​human​ ​relations,​ ​recruitment​ ​&​ ​training

Economic​ ​Opportunities​ ​and​ ​Threats

Economic​ ​environment:​ ​State​ ​of​ ​the​ ​economy​ ​in​ ​which​ ​businesses​ ​operate.​ ​Determined​ ​by​ ​governments​ ​ability​ ​to
control​ ​inflation,​ ​reduce​ ​unemployment,​ ​achieve​ ​economic​ ​growth,​ ​and​ ​have​ ​a​ ​healthy​ ​international​ ​trade​ ​balance.

Controlled​ ​Inflation​​ ​-​ ​priority​ ​for​ ​economic​ ​prosperity

Inflation:​​ ​Continual​ ​rise​ ​in​ ​the​ ​general​ ​level​ ​of​ ​prices​ ​in​ ​an​ ​economy.​ ​Measured​ ​by​ ​changes​ ​in​ ​the​ ​cost​ ​of
living​ ​for​ ​the​ ​average​ ​household​ ​in​ ​a​ ​country.
Raw​ ​material​ ​prices,​ ​catalogue​ ​costs,​ ​and​ ​wage​ ​claims​ ​are​ ​all​ ​affected​ ​by​ ​inflation

High​ ​inflation​ ​rate​ ​→​ ​less​ ​price​ ​competitive​ ​when​ ​trading​ ​overseas​ ​→​ ​low​ ​export​ ​earnings,​ ​national​ ​output
high​ ​unemployment.

Caused​ ​by​ ​excessive​ ​demand​ ​within​ ​economy,​ ​higher​ ​cost​ ​of​ ​production
Any​ ​factor​ ​that​ ​causes​ ​rise​ ​in​ ​consumption,​ ​investment,​ ​government​ ​spending​ ​or​ ​international​ ​trade​ ​earnings
will​ ​increase​ ​economy’s​ ​aggregate​ ​demand.
Aggregate​ ​Demand:​ ​total​ ​amount​ ​of​ ​goods​ ​and​ ​services​ ​demanded​ ​in​ ​the​ ​economy​ ​at​ ​a​ ​given​ ​overall​ ​price
level​ ​and​ ​in​ ​a​ ​given​ ​time​ ​period.

Reduced​ ​Unemployment​ ​-
Unemployment​ ​Rate:​ ​Measures​ ​the​ ​proportions​ ​of​ ​a​ ​country's​ ​workforce​ ​who​ ​are​ ​willing​ ​and​ ​able​ ​work​ ​but​ ​cannot
find​ ​employment.
high​ ​unemployment​ ​leads​ ​to​ ​high​ ​social​ ​costs
unemployed​ ​suffer​ ​from​ ​stress,​ ​low​ ​self-esteem,​ ​and​ ​depression
local​ ​community​ ​suffers​ ​from​ ​poverty​ ​and​ ​increased​ ​crime
increased​ ​burden​ ​on​ ​taxpayers​ ​to​ ​support​ ​government​ ​spending​ ​on​ ​welfare​ ​for​ ​unemployed

Governments​ ​use​ ​variety​ ​of​ ​policies​ ​to​ ​tackle​ ​unemployment​ ​which​ ​provide​ ​opportunities​ ​for​ ​business
1.5​ ​External​ ​Environment
-​​ ​ ​ ​ ​ ​ ​ ​Lower​ ​taxes
-​​ ​ ​ ​ ​ ​ ​ ​Increase​ ​spending​ ​to​ ​boost​ ​level​ ​of​ ​consumption
-​​ ​ ​ ​ ​ ​ ​ ​Reduce​ ​interest​ ​rates
-​​ ​ ​ ​ ​ ​ ​ ​Or​ ​increase​ ​to​ ​safeguard​ ​spending

Types​ ​of​ ​Unemployment

Frictional​ ​Unemployment Occurs​ ​when​ ​people​ ​change​ ​jobs​ ​as​ ​there​ ​is​ ​usually​ ​a​ ​time​ ​lag
between​ ​leaving​ ​a​ ​job​ ​and​ ​finding​ ​or​ ​starting​ ​another.

Seasonal​ ​Unemployment Caused​ ​by​ ​periodic​ ​and​ ​recurring​ ​changes​ ​in​ ​demand​ ​for​ ​a
product.​ ​Ex.​ ​Beaches​ ​in​ ​winter​ ​months​ ​b/c​ ​tourism

Technological​ ​Unemployment Results​ ​from​ ​the​ ​introduction​ ​of​ ​labor-saving​ ​technologies

which​ ​can​ ​cause​ ​mass​ ​scale​ ​unemployment

Regional​ ​Unemployment Refers​ ​to​ ​the​ ​different​ ​unemployment​ ​rates​ ​in​ ​different​ ​areas​ ​of
a​ ​country.​ ​Rural​ ​areas​ ​tend​ ​to​ ​have​ ​higher​ ​levels​ ​of
unemployment.

Structural​ ​Unemployment Occurs​ ​when​ ​the​ ​demand​ ​for​ ​products​ ​produced​ ​in​ ​a​ ​particular
industry​ ​continually​ ​falls,​ ​resulting​ ​in​ ​structural​ ​and​ ​long​ ​term
changes​ ​in​ ​demand.

Cyclical/​ ​Demand​ ​Deficient​ ​ ​Unemployment Cause​ ​by​ ​lack​ ​of​ ​demand​ ​in​ ​the​ ​economy.​ ​Most​ ​severe​ ​and
affects​ ​all​ ​industries.

Economic​ ​Growth-
Measure​ ​change​ ​in​ ​the​ ​Gross​ ​Domestic​ ​Product​ ​of​ ​a​ ​country​ ​overtime.​ ​Occurs​ ​if​ ​there​ ​is​ ​an​ ​increase​ ​in​ ​GDP​ ​for​ ​two
consecutive​ ​quarters.
GDP:​ ​Measure​ ​by​ ​the​ ​change​ ​in​ ​the​ ​value​ ​of​ ​the​ ​economy’s​ ​total​ ​output
Higher​ ​rates​ ​of​ ​growth​ ​suggest​ ​the​ ​economy​ ​is​ ​more​ ​prosperous,​ ​average​ ​person​ ​is​ ​earning​ ​more​ ​and​ ​creating​ ​more
opportunities​ ​of​ ​businesses.
​ ​Business​ ​Cycle:​ ​Pattern​ ​of​ ​fluctuations​ ​in​ ​economic​ ​growth

Boom:​ ​Level​ ​of​ ​economic​ ​activity​ ​rises​ ​with​ ​consumer​ ​expenditure,

investment​ ​and​ ​export​ ​earnings​ ​all​ ​increasing.​ ​At​ ​the​ ​peak
unemployment​ ​is​ ​low​ ​and​ ​consumer/business​ ​confidence​ ​levels​ ​are
high.

Recession:​ ​Occurs​ ​when​ ​there​ ​is​ ​a​ ​fall​ ​in​ ​GDP​ ​for​ ​two​ ​consecutive
quarters.​ ​Features​ ​include​ ​declining​ ​aggregate​ ​demand,​ ​lower
investment,​ ​falling​ ​export​ ​sales​ ​and​ ​rising​ ​unemployment.​ ​Businesses
which​ ​have​ ​a​ ​small​ ​range​ ​of​ ​products,​ ​or​ ​expensive​ ​(cars,​ ​houses​ ​etc.)
are​ ​most​ ​likely​ ​to​ ​suffer
Coping​ ​with​ ​a​ ​Recession:
-Cost​ ​reduction -Price​ ​reductions -Non-pricing​ ​strategies
-Branding -Outsourcing
1.5​ ​External​ ​Environment
Trough:​ ​Refers​ ​to​ ​the​ ​bottom​ ​of​ ​a​ ​recession.​ ​High​ ​unemployment,​ ​low​ ​levels​ ​of​ ​consumer​ ​spending​ ​and​ ​confidence,
investment​ ​and​ ​export​ ​earnings.

Recovery:​ ​Occurs​ ​when​ ​GDP​ ​starts​ ​to​ ​rise​ ​again​ ​after​ ​a​ ​slump.​ ​National​ ​output​ ​and​ ​income​ ​begins​ ​to​ ​increase​ ​level​ ​of
consumption,​ ​investment,​ ​exports​ ​and​ ​employment.

Poor​ ​Countries:​ ​Barriers​ ​to​ ​Grow​ ​→​ ​ ​lack​ ​of​ ​infrastructure

A​ ​Healthy​ ​International​ ​Trade​ ​Balance

International​ ​Trade​ ​Balance:​ ​records​ ​the​ ​value​ ​of​ ​a​ ​country’s​ ​export​ ​earnings​ ​and​ ​its​ ​import​ ​expenditure

Governments​ ​try​ ​to​ ​avoid​ ​deficits​ ​(expenditure​ ​exceeding​ ​export​ ​earnings)​ ​on​ ​their​ ​international​ ​trade​ ​balance
-​​ ​ ​ ​ ​ ​ ​ ​To​ ​correct​ ​in​ ​balances​ ​on​ ​trade​ ​governments​ ​alter​ ​their​ ​exchange​ ​rate
Exchange​ ​Rate:​ ​measures​ ​the​ ​value​ ​of​ ​domestic​ ​currency​ ​in​ ​terms​ ​of​ ​foreign​ ​currencies.
Higher​ ​exchange​ ​rate​ ​=​ ​appreciation​ ​of​ ​currency​ ​à​ ​high​ ​export​ ​prices
​ ​Lower​ ​exchange​ ​rate​ ​=​ ​depreciation​ ​of​ ​currency​ ​àhigher​ ​imported​ ​raw​ ​materials​ ​and​ ​components,

domestic​ ​firms​ ​price​ ​advantage

-​​ ​ ​ ​ ​ ​ ​ ​Continual​ ​large​ ​fluctuations​ ​in​ ​exchange​ ​rates​ ​creates​ ​threats​ ​for​ ​business.​ ​Becomes​ ​hard​ ​to​ ​forecast​ ​sales​ ​&​ ​costs
to​ ​materials.
-​​ ​ ​ ​ ​ ​ ​ ​Governments​ ​can​ ​set​ ​trade​ ​barriers​ ​to​ ​correct​ ​disparity​ ​in​ ​trade​ ​balance
​ ​Protectionist​ ​Measures:​ ​Refers​ ​to​ ​any​ ​government​ ​policy​ ​used​ ​to​ ​safeguard​ ​domestic​ ​businesses​ ​from

foreign​ ​competitors.​ ​This​ ​can​ ​pose​ ​a​ ​threat​ ​to​ ​businesses​ ​trying​ ​to​ ​establish​ ​themselves​ ​in​ ​overseas​ ​markets.
Tariffs,​ ​Quotas,​ ​Subsidies,​ ​Embargoes,​ ​Technological​ ​and​ ​safety​ ​standards

​ ​Environmental​ ​Opportunities​ ​and​ ​Threats

Individuals,​ ​organizations​ ​and​ ​governments​ ​increasingly​ ​aware​ ​of​ ​negative​ ​impacts​ ​of​ ​business​ ​on​ ​the​ ​environment.
- Private​ ​businesses​ ​unlikely​ ​to​ ​consider​ ​external​ ​costs​ ​(costs​ ​on​ ​society)​ ​w/out​ ​government​ ​intervention
​ ​→​ ​air​ ​&​ ​noise​ ​pollution,​ ​packaging​ ​waste,​ ​global​ ​warming

Changes​ ​in​ ​social​ ​attitudes​ ​towards​ ​the​ ​environment​ ​have​ ​meant​ ​businesses​ ​are​ ​increasingly​ ​reviewing​ ​their
practices.
➢ Otherwise​ ​risk​ ​ruining​ ​reputation​ ​and​ ​long​ ​term​ ​profitability
➢ Often​ ​compliance​ ​costs​ ​are​ ​high​ ​and​ ​businesses​ ​choose​ ​not​ ​to
➢ Depends​ ​on​ ​aims,​ ​objectives,​ ​attitudes​ ​of​ ​workers,​ ​available​ ​resources,​ ​impact​ ​on​ ​profit

Threats:​ ​Weather​ ​and​ ​seasonal​ ​changes​ ​→​ ​tourism

​ ​ ​Health​ ​scares​ ​and​ ​epidemics

Political​ ​Opportunities​ ​and​ ​Threats

Political​ ​stability​ ​of​ ​a​ ​country​ ​and​ ​government​ ​policies​ ​provide​ ​opportunities​ ​and​ ​threats
Laissez-​ ​Faire:​ ​government​ ​who​ ​ ​adopts​ ​a​ ​free​ ​market​ ​ideology​ ​and​ ​rarely​ ​intervenes​ ​→​ ​should​ ​stimulate​ ​healthy
competition​ ​and​ ​efficiency.​ ​More​ ​likely​ ​to​ ​attract​ ​foreign​ ​direct​ ​investment.
Interventionist​ ​approach:​ ​Adopted​ ​by​ ​majority​ ​of​ ​governments.​ ​Business​ ​is​ ​managed​ ​using​ ​policies​ ​and​ ​legislation.
Policy​ ​can​ ​be​ ​categorized​ ​into​ ​fiscal​ ​and​ ​monetary​ ​policy.
Fiscal​ ​Policy:​ ​Use​ ​of​ ​taxation​ ​and​ ​government​ ​expenditure​ ​policies​ ​to​ ​influence​ ​business​ ​activity.
Government​ ​spends​ ​tax​ ​revenue​ ​it​ ​raises​ ​on​ ​security,​ ​healthcare,​ ​education,​ ​transport,​ ​and​ ​infrastructure.
1.5​ ​External​ ​Environment
Deflationary​ ​Fiscal​ ​Policy:​ ​Used​ ​when​ ​economy​ ​experiences​ ​high​ ​rate​ ​of​ ​economic​ ​growth​ ​and
inflation​ ​so​ ​needs​ ​to​ ​be​ ​slowed​ ​down​ ​though​ ​higher​ ​taxes​ ​and​ ​reduced​ ​government​ ​expenditure
policies
Expansionary​ ​Fiscal​ ​Policy:​ ​Used​ ​to​ ​boost​ ​business​ ​activity,​ ​perhaps​ ​to​ ​get​ ​an​ ​economy​ ​out​ ​of
recession.​ ​Completed​ ​through​ ​tax​ ​cuts​ ​and​ ​increased​ ​public​ ​sector​ ​spending.
Monetary​ ​Policy:​ ​Use​ ​of​ ​interest​ ​rate​ ​policy​ ​to​ ​affect​ ​the​ ​money​ ​supply​ ​and​ ​exchange​ ​rates​ ​in​ ​order
to​ ​influence​ ​business​ ​activity.
Interest​ ​Rate:​ ​Price​ ​of​ ​money,​ ​both​ ​in​ ​terms​ ​of​ ​cost​ ​of​ ​borrowing​ ​money​ ​and​ ​the​ ​return​ ​for
saving​ ​money​ ​in​ ​a​ ​bank​ ​account.​ ​If​ ​economy​ ​is​ ​growing​ ​too​ ​fast​ ​-​ ​increase​ ​-​ ​combat​ ​inflation
Raising:
​ ​→​ ​makes​ ​borrowing​ ​less​ ​attractive
→​ ​higher​ ​interest​ ​repayments​ ​rate
→​ ​ ​reduces​ ​disposable​ ​income
→​ ​Reduce​ ​consumption​ ​and​ ​investment​ ​expenditure
→​ ​controls​ ​inflation
Deregulation:​ ​Removal​ ​of​ ​government​ ​rules​ ​to​ ​provide​ ​opportunities​ ​for​ ​businesses​ ​to​ ​prosper.
Should​ ​enhance​ ​efficiency​ ​and​ ​encourage​ ​more​ ​competition​ ​within​ ​the​ ​industry.
Strong​ ​correlation​ ​between​ ​corruption​ ​and​ ​poverty

Legal​ ​Opportunities​ ​and​ ​Threats

Government​ ​imposes​ ​rules,​ ​regulations​ ​and​ ​laws​ ​to​ ​ensure​ ​that​ ​the​ ​general​ ​public​ ​is​ ​protected​ ​from
adverse​ ​business​ ​activity.​ ​Government​ ​intervention​ ​can​ ​protect​ ​the​ ​interests​ ​of​ ​businesses.
Examples: -Anti-discrimination​ ​laws -Equal​ ​pay​ ​legislation
-Health​ ​and​ ​Safety​ ​at​ ​Work​ ​Acts -Statutory​ ​benefits -​ ​National​ ​minimum​ ​wage

Consumer​ ​Protection​ ​Legislation:​ ​Laws​ ​which​ ​exist​ ​that​ ​make​ ​it​ ​illegal​ ​for​ ​businesses​ ​to​ ​provide
false​ ​or​ ​misleading​ ​descriptions​ ​of​ ​their​ ​products​ ​and​ ​services.​ ​Products​ ​must​ ​meet​ ​certain​ ​criteria
and​ ​Businesses​ ​are​ ​held​ ​liable​ ​for​ ​any​ ​damage​ ​or​ ​injury​ ​caused​ ​by​ ​their​ ​defective​ ​products.

Employee​ ​Protection​ ​Legislation:​ ​These​ ​laws​ ​protect​ ​the​ ​interests​ ​and​ ​safety​ ​of​ ​workers.​ ​Ex.
antidiscrimination​ ​laws

Competition​ ​Legislation:​ ​Laws​ ​which​ ​ensure​ ​that​ ​anti-competitive​ ​practices​ ​are​ ​prohibited​ ​to
protect​ ​customers​ ​and​ ​smaller​ ​businesses​ ​from​ ​firms​ ​with​ ​monopoly​ ​power.​ ​Ex.​ ​monopolies,
copyright.

Ethical​ ​Opportunities​ ​and​ ​Threats

Business​ ​Ethics:​ ​Moral​ ​principles​ ​that​ ​should​ ​be​ ​considered​ ​in​ ​businesses​ ​decision-making.
Ethical​ ​firms​ ​act​ ​in​ ​a​ ​socially​ ​responsible​ ​way​ ​towards​ ​their​ ​stakeholders.
Ex:​ ​Protecting​ ​natural​ ​environment,​ ​using​ ​resources​ ​efficiently,​ ​paying​ ​workers​ ​on​ ​time,​ ​good
working​ ​conditions

Benefits:
➢ Attract​ ​and​ ​retain​ ​good​ ​quality​ ​workers
➢ Attract​ ​new​ ​customers​ ​and​ ​retain​ ​existing​ ​ones
➢ Generates​ ​good​ ​publicity​ ​and​ ​public​ ​relations
1.5​ ​External​ ​Environment
Social​ ​Audits:​ ​External​ ​reports​ ​on​ ​the​ ​ethical​ ​and​ ​social​ ​stance​ ​of​ ​a​ ​business​ ​as​ ​reported​ ​by​ ​an​ ​agency.

Drawbacks:
➢ High​ ​compliance​ ​costs

Changes​ ​in​ ​the​ ​external​ ​environment​ ​presents​ ​opportunities​ ​and​ ​threats.​ ​These​ ​changes​ ​affect​ ​a​ ​firm’s​ ​competitive
strategy.
1.6​ ​Growth​ ​and​ ​Evolution
Economies​ ​and​ ​Diseconomies​ ​of​ ​Scale
Businesses​ ​grow​ ​to​ ​benefit​ ​from​ ​economies​ ​of​ ​scale.

Economies​ ​of​ ​Scale​ ​:​ ​The​ ​lower​ ​average​ ​costs​ ​of​ ​production​ ​as​ ​a
firm​ ​operates​ ​on​ ​a​ ​larger​ ​scale​ ​due​ ​to​ ​improvements​ ​in​ ​productive
efficiency.​ ​Help​ ​businesses​ ​gain​ ​a​ ​competitive​ ​cost​ ​advantage.

Average​ ​Cost:​ ​ ​Cost​ ​per​ ​unit​ ​of​ ​output.​ ​Calculated

total cost
quantity of output
Average​ ​Fixed​ ​Costs:​ ​dividing​ ​the​ ​total​ ​fixed​ ​costs​ ​by​ ​the
level​ ​of​ ​output
Average​ ​Variable​ ​Costs:​ ​dividing​ ​the​ ​total​ ​variable​ ​costs​ ​by
the​ ​level​ ​of​ ​output

Internal​ ​Economies​ ​of​ ​Scale​:​ ​Economies​ ​of​ ​scale​ ​that​ ​occur​ ​inside​ ​the​ ​firm​ ​and​ ​are​ ​within​ ​its​ ​control
Technological​ ​Economies​:​ ​Using​ ​large​ ​machinery​ ​to​ ​mass​ ​produce​ ​products.​ ​Not​ ​feasible​ ​for​ ​small​ ​businesses

Financial​ ​Economies:​ ​ ​Larger​ ​firms​ ​who​ ​borrow​ ​large​ ​sums​ ​of​ ​money​ ​at​ ​smaller​ ​rates​ ​of​ ​interest.​ ​Smaller​ ​firms
struggle​ ​to​ ​find​ ​external​ ​funding​ ​as​ ​they​ ​are​ ​seen​ ​as​ ​“more​ ​risky”​ ​and​ ​have​ ​higher​ ​interest​ ​rates.

Managerial​ ​Economies​:​ ​ ​Smaller​ ​firms​ ​have​ ​to​ ​multiple​ ​roles,​ ​often​ ​not​ ​as​ ​good​ ​at​ ​it​ ​all.​ ​Larger​ ​businesses​ ​can
specialize​ ​which​ ​leads​ ​to​ ​increased​ ​levels​ ​of​ ​productivity.

​ ​Specialisation​ ​Economies:​ ​Similar​ ​to​ ​managerial,​ ​but​ ​the​ ​specialization​ ​of​ ​the​ ​work​ ​force​ ​not​ ​managers

Marketing​ ​Economies:​ ​Can​ ​spread​ ​the​ ​costs​ ​of​ ​advertising​ ​by​ ​using​ ​the​ ​same​ ​marketing​ ​campaign​ ​all​ ​around
the​ ​world.

Purchasing​ ​Economies:​ ​Large​ ​firms​ ​lower​ ​costs​ ​by​ ​buying​ ​in​ ​bulk.​ ​Relatively​ ​small​ ​firms​ ​still​ ​benefit​ ​from​ ​this.

Risk-Bearing​ ​Economies:​ ​Conglomerates​ ​can​ ​spread​ ​their​ ​fixed​ ​costs​ ​across​ ​a​ ​wide​ ​range​ ​of​ ​operations.
Unfavourable​ ​activity​ ​in​ ​one​ ​sector​ ​can​ ​be​ ​offset​ ​by​ ​others.

External​ ​Economies​ ​of​ ​Scale​:​ ​Economies​ ​of​ ​scale​ ​that​ ​arise​ ​outside​ ​the​ ​business​ ​due​ ​to​ ​growth​ ​in​ ​industry.
Technological​ ​Progress:​ ​Increases​ ​productivity​ ​within​ ​the​ ​industry.

Improved​ ​Transportation​ ​Networks:​ ​Congestion​ ​increases​ ​business​ ​costs​ ​and​ ​reduces​ ​revenues.
(deliveries/employers)

Abundance​ ​of​ ​Skilled​ ​Labour:​ ​Provides​ ​local​ ​businesses​ ​with​ ​suitable​ ​pool​ ​of​ ​individuals​ ​and​ ​cuts​ ​recruitment
costs​ ​without​ ​harming​ ​productivity​ ​levels.

Regional​ ​Specialization:​ ​When​ ​a​ ​particular​ ​region​ ​has​ ​a​ ​highly​ ​regarded​ ​and​ ​trustworthy​ ​reputation​ ​for
producing​ ​a​ ​good/service.​ ​Allows​ ​industry​ ​to​ ​benefit​ ​from​ ​specialized​ ​labour,​ ​and​ ​increases​ ​reputation​ ​which
allows​ ​for​ ​the​ ​charge​ ​of​ ​higher​ ​prices.

Diseconomies​ ​of​ ​Scale:​ ​Result​ ​of​ ​higher​ ​unit​ ​costs​ ​as​ ​a​ ​firm​ ​continues​ ​to​ ​increase​ ​in​ ​size.​ ​When​ ​a​ ​business​ ​becomes
outsized​ ​and​ ​inefficient​ ​so​ ​average​ ​costs​ ​begin​ ​to​ ​rise.
1.6​ ​Growth​ ​and​ ​Evolution
Internal​ ​Diseconomies​ ​of​ ​Scale:​ ​Usually​ ​occur​ ​due​ ​to​ ​managerial​ ​problems
Lack​ ​of​ ​Coordination​ ​and​ ​Span​ ​of​ ​Control:​ ​As​ ​firms​ ​become​ ​bigger​ ​managers​ ​lose​ ​control​ ​which​ ​increases
communication​ ​problems​ ​and​ ​slows​ ​down​ ​decision​ ​making.​ ​Workers​ ​across​ ​the​ ​globe​ ​may​ ​feel​ ​isolation
which​ ​harms​ ​staff​ ​morale.

Poorer​ ​Working​ ​Relationships:​ ​Senior​ ​managers​ ​are​ ​likely​ ​to​ ​become​ ​detached​ ​from​ ​those​ ​lower,​ ​damaging
communication,​ ​staff​ ​morale,​ ​productivity​ ​,​ ​and​ ​increases​ ​average​ ​cost​ ​of​ ​production.

Bureaucracy​ ​(administration,​ ​paperwork,​ ​and​ ​policies)​:​ ​ ​Increases​ ​which​ ​makes​ ​decision​ ​making​ ​time
consuming​ ​and​ ​adds​ ​to​ ​cost​ ​of​ ​business.​ ​Also​ ​damages​ ​communication​ ​etc.

Complacency:​ ​Un-​ ​eagerness​ ​to​ ​improve​ ​or​ ​change​ ​from​ ​being​ ​a​ ​large​ ​player​ ​in​ ​market​ ​reduces​ ​productivity

Because​ ​of​ ​all​ ​these​ ​disadvantages​ ​some​ ​businesses​ ​prefer​ ​to​ ​grow​ ​through​ ​franchising​ ​which​ ​reduces​ ​costs.

External​ ​Diseconomies​ ​of​ ​Scale:​ ​Increase​ ​in​ ​average​ ​costs​ ​of​ ​production​ ​as​ ​firms​ ​grow​ ​due​ ​to​ ​factors​ ​beyond​ ​its
control.
Increasing​ ​Market​ ​Rent:​ ​Adds​ ​to​ ​fixed​ ​costs​ ​→​ ​rise​ ​in​ ​unit​ ​costs

Higher​ ​wages​ ​and​ ​financial​ ​rewards:​ ​Workers​ ​with​ ​greater​ ​choice​ ​of​ ​employers​ ​in​ ​the​ ​local​ ​area​ ​ ​leads​ ​to​ ​businesses
having​ ​to​ ​work​ ​to​ ​retain​ ​employees​ ​and​ ​attract​ ​new​ ​staff​ ​which​ ​increases​ ​costs.

Traffic​ ​Congestion:​ ​Too​ ​many​ ​businesses​ ​being​ ​located​ ​in​ ​the​ ​same​ ​area,​ ​increased​ ​transportation​ ​costs,​ ​increases​ ​in
unit​ ​costs​ ​of​ ​production.

Small​ ​Versus​ ​Large​ ​Organizations

The​ ​merits​ ​of​ ​small​ ​versus​ ​large​ ​organizations

Relative​ ​size​ ​of​ ​a​ ​business​ ​is​ ​measure​ ​by:

➔ Market​ ​Share:​ ​A​ ​firm’s​ ​sales​ ​revenue​ ​as​ ​a​ ​percentage​ ​of​ ​the​ ​industry’s​ ​total​ ​revenue
➔ Total​ ​Revenue:​ ​The​ ​value​ ​of​ ​a​ ​firm’s​ ​annual​ ​sales​ ​turnover​ ​per​ ​time​ ​period
➔ Size​ ​of​ ​Workforce:​ ​The​ ​total​ ​number​ ​of​ ​employees​ ​hired​ ​by​ ​the​ ​business
➔ Profit:​ ​The​ ​value​ ​of​ ​a​ ​firm’s​ ​profits​ ​per​ ​time​ ​period
➔ Capital​ ​Employed:​ ​The​ ​value​ ​of​ ​the​ ​firm’s​ ​capital​ ​investment​ ​for​ ​the​ ​business​ ​to​ ​function
The​ ​size​ ​of​ ​a​ ​business​ ​is​ ​measured​ ​in​ ​relative​ ​terms​ ​-​ ​compared​ ​to​ ​rivals

Benefits​ ​Being​ ​Large:

Factor Benefit

Brand​ ​Recognition Familiarity​ ​with​ ​the​ ​brand​ ​allows​ ​selling​ ​to​ ​a​ ​wider​ ​market

Brand​ ​Reputation Image​ ​and​ ​reputation​ ​leads​ ​to​ ​more​ ​trust

Value-added​ ​services Resources​ ​to​ ​provide​ ​larger​ ​range​ ​of​ ​services

Lower​ ​Prices Greater​ ​price​ ​discounts​ ​due​ ​to​ ​economies​ ​of​ ​scale

Greater​ ​choice More​ ​selection​ ​for​ ​customers

1.6​ ​Growth​ ​and​ ​Evolution
Customer​ ​loyalty Perceived​ ​value​ ​and​ ​trust​ ​for​ ​money

Benefits​ ​Being​ ​Small:

Factor Benefit

Cost​ ​Control Big​ ​organizations​ ​have​ ​diseconomies​ ​of​ ​scale​ ​in​ ​control,
coordination​ ​and​ ​communication.

Financial​ ​Risk Owners​ ​can​ ​better​ ​manage​ ​and​ ​control​ ​their​ ​finances,​ ​and​ ​have
less​ ​risk​ ​than​ ​huge​ ​organizations​ ​with​ ​lots​ ​of​ ​funds.

Government​ ​Aid Government​ ​grants​ ​and​ ​subsidies​ ​can​ ​be​ ​offered​ ​to​ ​help​ ​start​ ​up
and​ ​training​ ​to​ ​provide​ ​for​ ​employment​ ​for​ ​local​ ​communities.

Local​ ​Monopoly​ ​Power Small​ ​businesses​ ​enjoy​ ​being​ ​only​ ​firm​ ​in​ ​particular​ ​location

Personalised​ ​Services Smaller​ ​firms​ ​are​ ​more​ ​likely​ ​to​ ​have​ ​the​ ​time​ ​to​ ​devote​ ​to
individual​ ​customers.

Flexibility Small​ ​businesses​ ​better​ ​adapt​ ​to​ ​change,​ ​large​ ​businesses​ ​have
financial​ ​commitments​ ​and​ ​conflicting​ ​stakeholder​ ​objectives
which​ ​reduce​ ​ability​ ​to​ ​change

Small​ ​Market​ ​Size Large​ ​businesses​ ​may​ ​not​ ​find​ ​it​ ​worthwhile​ ​to​ ​compete​ ​with
small​ ​businesses,​ ​allowing​ ​them​ ​to​ ​thrive

Optimal​ ​size​ ​for​ ​business​ ​depends​ ​on​ ​its​ ​internal​ ​structure,​ ​costs,​ ​aims​ ​and​ ​objectives.​ ​In​ ​reality​ ​firms​ ​may
not​ ​operate​ ​at​ ​optimal​ ​size​ ​due​ ​to​ ​lack​ ​of​ ​resources.

Why​ ​businesses​ ​Grow?​ ​To​ ​gain​ ​more​ ​profit​ ​in​ ​the​ ​long​ ​run.
→​ ​reap​ ​benefits​ ​of​ ​economies​ ​of​ ​scale
→​ ​growth​ ​as​ ​survival​ ​to​ ​competitors​ ​who​ ​are​ ​also​ ​growing
→​ ​spread​ ​risks​ ​by​ ​diversifying

Internal​ ​Growth
The​ ​difference​ ​between​ ​internal​ ​and​ ​external​ ​growth
Internal​ ​Growth:​ ​Occurs​ ​when​ ​a​ ​business​ ​grows​ ​organically​ ​using​ ​its​ ​own​ ​capabilities​ ​and​ ​resources​ ​to
increase​ ​the​ ​scale​ ​of​ ​its​ ​operations​ ​and​ ​sales​ ​revenues.​ ​Funded​ ​through​ ​a​ ​combination​ ​of​ ​retained​ ​profits,
borrowing​ ​and​ ​issuing​ ​of​ ​new​ ​shares.

Changing​ ​Price Effective​ ​Promotion Product​ ​Improvement Greater​ ​Distribution

Network​ ​(placement) Credit​ ​(buy​ ​now​ ​pay​ ​later) Increased​ ​Capital​ ​Expenditure
Improved​ ​Training​ ​and​ ​Development Providing​ ​Value​ ​for​ ​Money

Increase​ ​sales​ ​revenue​ ​by​ ​making​ ​product​ ​more​ ​appealing​ ​and​ ​available​ ​in​ ​a​ ​larger​ ​market

Advantages Disadvantages
1.6​ ​Growth​ ​and​ ​Evolution
Better​ ​control​ ​and​ ​coordination,​ ​less​ ​loss​ ​of Diseconomies​ ​of​ ​Scale
control

Inexpensive,​ ​less​ ​capital​ ​involved Need​ ​to​ ​restructure​ ​→​ ​time,​ ​money,​ ​training

Maintains​ ​corporate​ ​culture Dilution​ ​of​ ​control​ ​and​ ​ownership,​ ​more​ ​conflict​ ​of
shareholder​ ​interests

Less​ ​Risky Slower​ ​growth

Business​ ​expanding​ ​and​ ​evolving​ ​using​ ​its​ ​own​ ​capabilities​ ​and​ ​its​ ​own​ ​resources​ ​in​ ​new​ ​ways
- Selling​ ​to​ ​new​ ​customers​ ​in​ ​existing​ ​markets
- Finding​ ​new​ ​markets​ ​(local​ ​/​ ​overseas)
- Launching​ ​new​ ​products​ ​to​ ​existing​ ​/​ ​new​ ​markets

External​ ​Growth
The​ ​following​ ​external​ ​growth​ ​methods:​ ​mergers​ ​and​ ​acquisitions​ ​(M&As)​ ​and​ ​takeovers,​ ​ ​joint​ ​ventures,
strategic​ ​alliances,​ ​ ​franchising

External​ ​Growth:​ ​Occurs​ ​through​ ​dealings​ ​with​ ​outside​ ​organizations.​ ​Usually​ ​comes​ ​in​ ​the​ ​form​ ​of
alliances​ ​or​ ​mergers​ ​with​ ​other​ ​firms​ ​through.
Benefits
- Faster​ ​way​ ​to​ ​grow​ ​and​ ​evolve
- Quick​ ​way​ ​to​ ​reduce​ ​competition
- Brings​ ​greater​ ​market​ ​share​ ​and​ ​market​ ​power
- Generates​ ​new​ ​skills,​ ​experiences,​ ​and​ ​customers

Disadvantage
- Huge​ ​cost

Mergers​ ​and​ ​Acquisitions:​​ ​When​ ​two​ ​firms​ ​form​ ​a​ ​single​ ​company.
Merger:​​ ​When​ ​two​ ​firms​ ​agree​ ​to​ ​form​ ​a​ ​new​ ​company​ ​ex.​ ​American​ ​Airlines​ ​and​ ​US​ ​Airways
Takeover:​ ​When​ ​a​ ​company​ ​buys​ ​a​ ​controlling​ ​interest​ ​in​ ​another​ ​firm.​ ​Google​ ​and​ ​Youtube

Reasons​ ​why​ ​businesses​ ​become​ ​takeover​ ​targets

- They​ ​have​ ​a​ ​growth​ ​potential​ ​but​ ​lack​ ​sufficient​ ​funds​ ​for​ ​internal​ ​growth
- They​ ​are​ ​seen​ ​as​ ​a​ ​small​ ​rival​ ​that​ ​has​ ​growth​ ​potential
- They​ ​have​ ​a​ ​widely​ ​recognized​ ​corporate​ ​name​ ​or​ ​brand​ ​but​ ​are​ ​facing​ ​a​ ​financial​ ​crisis
- They​ ​are​ ​vulnerable​ ​due​ ​to​ ​a​ ​drop​ ​in​ ​profits​ ​and​ ​subsequent​ ​fall​ ​in​ ​their​ ​share​ ​price

Types​ ​of​ ​Integration:

● Horizontal​ ​Integration:​ ​merging​ ​with​ ​a​ ​businesses​ ​in​ ​the​ ​same​ ​industry
● Vertical​ ​Integration:​ ​merging​ ​with​ ​a​ ​business​ ​at​ ​a​ ​different​ ​stage​ ​of​ ​production​ ​(forward-​ ​towards
the​ ​consumer,​ ​backwards-​ ​towards​ ​the​ ​earlier​ ​stage​ ​of​ ​production)
● Lateral​ ​Integration​ ​-​ ​ ​merging​ ​with​ ​firms​ ​with​ ​a​ ​similar​ ​operation​ ​but​ ​who​ ​do​ ​not​ ​directly​ ​compete
with​ ​each​ ​other
1.6​ ​Growth​ ​and​ ​Evolution
● Conglomerate​ ​M&A’s:​ ​amalgamation​ ​of​ ​businesses​ ​in​ ​a​ ​completely​ ​distinct​ ​or​ ​diversified​ ​market

Benefits Drawbacks

Greater​ ​market​ ​share Redundancies,​ ​job​ ​losses​ ​are​ ​likely​ ​to​ ​occur

Economies​ ​of​ ​Scale Conflict

Synergy,​ ​ability​ ​to​ ​use​ ​combined​ ​resources​ ​to​ ​boost Culture​ ​clash
productivity​ ​and​ ​profit

Survival,​ ​new​ ​firm​ ​is​ ​stronger​ ​and​ ​better​ ​able​ ​to Loss​ ​of​ ​Control
compete​ ​with​ ​its​ ​rivals

Diversification Diseconomies​ ​of​ ​Scale,​ ​increased​ ​bureaucracy,

longer​ ​channels​ ​of​ ​communication

Regulatory​ ​Problems,​ ​governments​ ​concerned

with​ ​monopolies

Join​ ​Venture:​ ​When​ ​two​ ​or​ ​more​ ​business​ ​split​ ​the​ ​costs,​ ​risks,​ ​control,​ ​and​ ​rewards​ ​of​ ​a​ ​business​ ​project.
In​ ​doing​ ​so​ ​the​ ​parties​ ​agree​ ​to​ ​set​ ​up​ ​a​ ​new​ ​legal​ ​entity.

Allow​ ​organizations​ ​to​ ​enjoy​ ​some​ ​benefits​ ​of​ ​mergers​ ​and​ ​acquisitions​ ​without​ ​loosing​ ​corporate​ ​identity.
→​ ​Synergy →​ ​Spreading​ ​of​ ​Costs​ ​and​ ​Risks →​ ​Entry​ ​to​ ​foreign​ ​markets
→​ ​Relatively​ ​cheap →​ ​Competitive​ ​advantages →​ ​Exploitation​ ​of​ ​local​ ​knowledge
→​ ​High​ ​Success​ ​Rate

Strategic​ ​Alliance:​ ​Similar​ ​to​ ​a​ ​joint​ ​venture​ ​in​ ​that​ ​businesses​ ​split​ ​costs,​ ​risks,​ ​and​ ​control,​ ​but​ ​the
business​ ​get​ ​to​ ​keep​ ​their​ ​identities​ ​as​ ​independent​ ​organizations.
Four​ ​Stages​ ​To​ ​Formation:
→​ ​Feasibility​ ​Study:​ ​Investigate​ ​and​ ​establish​ ​the​ ​relations,​ ​objectives,​ ​and​ ​feasibility​ ​of​ ​the​ ​SA
→​ ​Partnership​ ​Assessment:​ ​annalyse​ ​what​ ​partners​ ​have​ ​to​ ​offering​ ​human​ ​and​ ​financial​ ​resources
→​ ​Contract​ ​Negotiation:​ ​Mutually​ ​acceptable​ ​contract​ ​is​ ​formed​ ​entailing​ ​each​ ​member's
contributions​ ​and​ ​rewards.
→​ ​Implementation:​ ​Operations​ ​are​ ​initiated​ ​with​ ​commitment​ ​to​ ​the​ ​contract​ ​from​ ​all​ ​parties

Franchising:​ ​Form​ ​of​ ​business​ ​ownership​ ​whereby​ ​a​ ​person​ ​or​ ​business​ ​buys​ ​a​ ​license​ ​to​ ​trade​ ​using
another​ ​firm’s​ ​name,​ ​logos,​ ​brands​ ​and​ ​trademarks.​ ​In​ ​return​ ​the​ ​franchisee​ ​pays​ ​a​ ​license​ ​fee​ ​&​ ​royalty
payments​ ​(based​ ​on​ ​sales​ ​revenue)​ ​to​ ​the​ ​franchisor.​ ​ ​Ex.​ ​Subway,​ ​7-11.​ ​McDonalds.

Benefits
For​ ​Franchisor For​ ​Franchisee

Rapid​ ​growth​ ​without​ ​risking​ ​huge​ ​amounts​ ​of Relatively​ ​low​ ​risk​ ​as​ ​franchisor​ ​has​ ​a​ ​tried​ ​and
money. tested​ ​formula

Allows​ ​national/international​ ​presence​ ​minus​ ​high Low​ ​start​ ​up​ ​costs​ ​&​ ​no​ ​market​ ​research
1.6​ ​Growth​ ​and​ ​Evolution
costs/​ ​M&A’s

Benefits​ ​from​ ​growth​ ​without​ ​worrying​ ​about Training​ ​and​ ​advice​ ​on​ ​financial​ ​management
running​ ​costs​ ​(staff​ ​salaries,​ ​stock,​ ​training) received

Royalty​ ​payments​ ​as​ ​%​ ​of​ ​sales​ ​revenue Free​ ​advertising​ ​and​ ​promotion

Franchisees​ ​have​ ​more​ ​incentives​ ​to​ ​do​ ​better​ ​than Greater​ ​awareness​ ​of​ ​local​ ​markets​ ​and​ ​needs
salaried​ ​managers boosting​ t​ heir​ ​chance​ ​of​ ​success

Drawbacks
For​ ​Franchisor For​ ​Franchisee

Huge​ ​risk​ ​in​ ​allowing​ ​others​ ​to​ ​use​ ​name,​ ​can Cannot​ ​try​ ​out​ ​new​ ​ideas,​ ​restricting
damage​ ​reputation​ ​of​ ​businesses entrepreneurial​ ​talents

Difficult​ ​to​ ​control​ ​daily​ ​operations​ ​of​ ​franchisees Very​ ​expensive​ ​and​ ​no​ ​guarantee​ ​it​ ​will​ ​pay​ ​back

Not​ ​as​ ​quick​ ​as​ ​M&A’s Significant​ ​portion​ ​of​ ​revenues​ ​to​ ​franchisor

Role​ ​and​ ​Impact​ ​of​ ​Globalization

The​ ​role​ ​and​ ​impact​ ​of​ ​globalization​ ​on​ ​the​ ​growth​ ​and​ ​evolution​ ​of​ ​businesses.
Globalization:​ ​The​ ​growing​ ​integration​ ​and​ ​interdependence​ ​of​ ​the​ ​world's​ ​economies
National​ ​economies​ ​shift​ ​towards​ ​a​ ​single​ ​global​ ​economy​ ​where​ ​consumers​ ​have​ ​similar​ ​tastes
Ex.​ ​McDonalds,​ ​Coca-Cola,​ ​Apple

Threats
→​ ​Increases​ ​the​ ​level​ ​of​ ​competition,​ ​internet​ ​reduces​ ​barriers​ ​to​ ​competitors
→​ ​Meeting​ ​customer​ ​expectations​ ​becomes​ ​more​ ​demanding​ ​to​ ​hold​ ​onto​ ​competitor​ ​advantage

Opportunities
→​ ​Businesses​ ​with​ ​a​ ​global​ ​presence​ ​can​ ​benefit​ ​from​ ​economies​ ​of​ ​scale
→​ ​Greater​ ​choice​ ​of​ ​location
→​ ​External​ ​growth​ ​opportunities​ ​allows​ ​for​ ​faster​ ​growth​ ​and​ ​choice​ ​in​ ​expansion​ ​plans
→​ ​Increased​ ​sources​ ​of​ ​finance

Growth​ ​of​ ​Multinational​ ​Companies

Reasons​ ​for​ ​the​ ​growth​ ​of​ ​multinational​ ​companies
Multinational​ ​Company:​ ​An​ ​organization​ ​that​ ​operates​ ​in​ ​two​ ​or​ ​more​ ​countries
Transnational​ ​Corporation:​ ​Regional​ ​head​ ​offices​ ​rather​ ​than​ ​a​ ​single​ ​international​ ​base
Ex.​ ​Apple,​ ​Coca-Cola,​ ​HSBC

Why​ ​Businesses​ ​Strive​ ​to​ ​Become​ ​MNC’s

➢ Increased​ ​customer​ ​base,​ ​increased​ ​their​ ​sales​ ​turnover
➢ Cheaper​ ​production​ ​costs
1.6​ ​Growth​ ​and​ ​Evolution
➢ Production​ ​levels​ ​increase​ ​and​ ​MNCs​ ​can​ ​benefit​ ​from​ ​economies​ ​of​ ​scale
➢ MNCs​ ​can​ ​avoid​ ​protectionist​ ​policies
➢ Spread​ ​risks​ ​among​ ​many​ ​markets

Impact​ ​of​ ​MNCs​ ​on​ ​the​ ​Host​ ​Countries

The​ ​impact​ ​of​ ​MNCs​ ​on​ ​the​ ​host​ ​countries
Host​ ​Country:​ ​Any​ ​nation​ ​that​ ​allows​ ​a​ ​multinational​ ​company​ ​to​ ​set​ ​up​ ​in​ ​its​ ​country.

Advantages​ ​and​ ​Disadvantages​ ​of​ ​MNCs​ ​to​ ​the​ ​host​ ​countries

Advantages Disadvantages

Creates​ ​jobs​ ​in​ ​the​ ​host​ ​country Capable​ ​of​ ​causing​ ​unemployment​ ​as​ ​they​ ​pose​ ​a
threat​ ​to​ ​domestic​ ​businesses

Boost​ ​host​ ​country’s​ ​gross​ ​domestic​ ​product Profit​ ​are​ ​sent​ ​back​ ​to​ ​the​ ​home​ ​country

Introduced​ ​new​ ​skills​ ​and​ ​technology Social​ ​responsibility​ ​of​ ​MNCs​ ​in​ ​the​ ​attempt​ ​to​ ​grow
and​ ​exploit​ ​resources,​ ​host​ ​countries​ ​often​ ​can’t
control​ ​actions​ ​of​ ​large​ ​MNCs

Intensify​ ​competition​ ​in​ ​host​ ​country,​ ​benefits Fierce​ ​competitive​ ​pressure​ ​can​ ​force​ ​domestic​ ​firms
domestic​ ​customers may​ ​have​ ​to​ ​reduce​ ​prices​ ​to​ ​remain​ ​competitive​ ​or
be​ ​prone​ ​to​ ​takeover​ ​bids​ ​/collapses

Strategies​ ​for​ ​growth

- First-mover​ ​advantage:​ ​first​ ​in​ ​a​ ​market​ ​which​ ​allows​ ​businesses​ ​to​ ​establish​ ​market​ ​share,
reputation,​ ​and​ ​a​ ​loyal​ ​customer​ ​base
- Unique​ ​Selling​ ​Point:​ ​offering​ ​products​ ​which​ ​stand​ ​out​ ​from​ ​others
- Branding:​ ​recognizing​ ​brand​ ​provides​ ​huge​ ​opportunities
- Economies​ ​of​ ​Scale
- Diversification

Demerger:​ ​When​ ​ ​a​ ​company​ ​sells​ ​off​ ​a​ ​significant​ ​part​ ​of​ ​its​ ​business.
→​ ​Sell​ ​unprofitable​ ​sections​ ​of​ ​the​ ​business
→​ ​Avoid​ ​rising​ ​unit​ ​costs​ ​and​ ​inefficiency​ ​by​ ​being​ ​too​ ​large
→​ ​Raise​ ​cash​ ​to​ ​sustain​ ​operations​ ​in​ ​other​ ​parts​ ​of​ ​the​ ​business
→​ ​Have​ ​a​ ​clearer​ ​focus​ ​by​ ​concentrating​ ​their​ ​efforts​ ​on​ ​a​ ​smaller​ ​range​ ​of​ ​business​ ​operations
Likely​ ​to​ ​be​ ​redundancies​ ​which​ ​should​ ​be​ ​planned​ ​and​ ​managed

Brand​ ​Acquisitions:​ ​Buy​ ​one​ ​of​ ​a​ ​company's​ ​brands.​ ​Relatively​ ​cheaper​ ​and​ ​lower​ ​risk​ ​growth​ ​stratergy.
1.7​ ​Organizational​ ​Planning​ ​Tools
The​ ​Fishbone​ ​Diagram
The​ ​following​ ​planning​ ​tools​ ​in​ ​a​ ​given​ ​situation:​ ​Fishbone​ ​Diagram,​ ​Decision​ ​Tree,​ ​Force​ ​Field​ ​Analysis,
Gantt​ ​Chart

Fishbone​ ​diagram​ ​(Cause​ ​and​ ​Effect​ ​Model):​ ​Organizational​ ​planning​ ​tool​ ​based​ ​on​ ​identifying​ ​and
dealing​ ​with​ ​the​ ​most​ ​likely​ ​root​ ​causes​ ​of​ ​a​ ​problem​ ​or​ ​issue​ ​facing​ ​a​ ​business.

As​ ​a​ ​qualitative​ ​organizational​ ​planning​ ​tool,​ ​it​ ​is​ ​used​ ​to​ ​identify​ ​the​ ​root​ ​cause​ ​of​ ​a​ ​problem.

The​ ​4​ ​M’s​ ​can​ ​be​ ​used​ ​to​ ​identify​ ​different​ ​categories​ ​of​ ​causes​ ​of​ ​the​ ​problem:
Management:​ ​unsuitable​ ​management​ ​style​ ​and​ ​miscommunication
Manpower:​ ​unskilled​ ​workers,​ ​lack​ ​training​ ​and​ ​inefficient​ ​personnel
Machinery:​ ​Technological​ ​failures,​ ​faulty​ ​equipment,​ ​use​ ​of​ ​outdated​ ​machinery
Materials:​ ​Substandard​ ​materials​ ​and​ ​delayed​ ​deliveries

Once​ ​the​ ​fishbone​ ​is​ ​completed​ ​discussions​ ​take​ ​place​ ​to​ ​decide​ ​the​ ​most​ ​likely​ ​root​ ​cause​ ​of​ ​the​ ​problem.

For​ ​the​ ​fishbone​ ​to​ ​work:

1. The​ ​problem​ ​or​ ​issue​ ​must​ ​be​ ​clearly​ ​stated​ ​and​ ​agreed​ ​upon​ ​before​ ​further​ ​discussions​ ​begin
1.7​ ​Organizational​ ​Planning​ ​Tools
2. Contributors​ ​must​ ​be​ ​concise​ ​and​ ​to​ ​the​ ​point​ ​-
causes​ ​not​ ​symptoms
3. For​ ​Separate​ ​overcrowded​ ​nodes
4. Consider​ ​which​ ​root​ ​causes​ ​warrant​ ​further
investigation
5. Discuss​ ​how​ ​each​ ​item​ ​affects​ ​the​ ​problem​ ​being
targeted.

Advantages:​ ​Easy​ ​to​ ​use​ ​and​ ​understand.​ ​Allows​ ​for

brainstorming​ ​in​ ​a​ ​systematic​ ​and​ ​logical​ ​ways.​ ​Visual
diagnosis​ ​of​ ​a​ ​problem.

Disadvantage:​ ​Can​ ​be​ ​simplistic​ ​for​ ​real​ ​world​ ​problems.​ ​In

practice​ ​the​ ​fishbone​ ​is​ ​used​ ​in​ ​conjunction​ ​with​ ​other
models

Decision​ ​Tree
Decision​ ​trees:​ ​A​ ​quantitative​ ​organizational​ ​planning​ ​tool​ ​that
calculates​ ​the​ ​probable​ ​values​ ​of​ ​different​ ​options,​ ​helping​ ​managers
to​ ​minimize​ ​the​ ​risks​ ​in​ ​decision​ ​making.
Decision​ ​Nodes:​ ​Shown​ ​as​ ​squares,​ ​used​ ​when​ ​there​ ​is​ ​a
decision​ ​to​ ​be​ ​made
Chance​ ​Nodes:​ ​Shown​ ​as​ ​circles,​ ​used​ ​to​ ​show​ ​different
outcomes​ ​of​ ​a​ ​decision
Probability:​ ​Probability​ ​of​ ​each​ ​chance​ ​node​ ​must​ ​add​ ​up​ ​to
one
Branch​:​ ​Actual​ ​values​ ​of​ ​each​ ​outcome​ ​are​ ​put​ ​at​ ​the​ ​end​ ​of
each​ ​branch

Advantages​ ​and​ ​Disadvantages​ ​of​ ​Decision​ ​Trees

Advantages Disadvantages

Problems​ ​seen​ ​in​ ​clear​ ​and​ ​logical​ ​manner Only​ ​estimates​ ​and​ ​subject​ ​to​ ​forecasting​ ​errors

Potential​ ​options​ ​can​ ​be​ ​seen​ ​at​ ​the​ ​same Based​ ​on​ ​quantitative​ ​data​ ​only
time​ ​which​ ​speeds​ ​up​ ​decision​ ​making

Consider​ ​risks​ ​and​ ​negative​ ​outcomes Does​ ​not​ ​necessarily​ ​reduce​ ​the​ ​amount​ ​of​ ​risk​ ​in
decision​ ​making

Enable​ ​more​ ​scientific​ ​and​ ​objective Delays​ ​in​ ​planning​ ​process​ ​can​ ​void​ ​data​ ​by​ ​the
decisions​ ​to​ ​be​ ​made time​ ​a​ ​decision​ ​is​ ​actually​ ​made

Visual​ ​stimulus,​ ​provide​ ​tangible​ ​insight Assigned​ ​probabilities​ ​so​ ​the​ ​task​ ​can​ ​be​ ​biased
1.7​ ​Organizational​ ​Planning​ ​Tools
into​ ​a​ ​problem to​ ​justify​ ​preference​ ​of​ ​management

Force​ ​Field​ ​Analysis

Force​ ​Field​ ​Analysis:​ ​Deals​ ​with​ ​forces​ ​for​ ​and​ ​against​ ​change.​ ​Driving
forces​ ​being​ ​the​ ​benefits​ ​of​ ​change​ ​and​ ​restraining​ ​forces​ ​being​ ​the​ ​causes
of​ ​resistance​ ​to​ ​change.
Driving​ ​Forces:​ ​Push​ ​for​ ​change Restraining​ ​forces:​ ​Act
against​ ​change

Different​ ​forces​ ​are​ ​listed​ ​and​ ​allocated​ ​a​ ​weight​ ​from​ ​1-5,​ ​scores​ ​are
totalled

Weaknesses:​ ​Weights​ ​may​ ​be​ ​attached​ ​subjectively​ ​rather​ ​than​ ​based​ ​off
facts​ ​&​ ​evidence,​ ​not​ ​all​ ​relevant​ ​forces​ ​may​ ​be​ ​considered​ ​to​ ​deliberately
over​ ​emphasize​ ​the​ ​need​ ​for​ ​change

Gantt​ ​Charts
Gantt​ ​Charts​:​ ​Visual​ ​representation​ ​of​ ​all​ ​the​ ​tasks​ ​in​ ​a​ ​particular​ ​project​ ​plotted​ ​against​ ​the​ ​timescale.​ ​As​ ​a
planning​ ​and​ ​scheduling​ ​tool,​ ​it​ ​allows​ ​project​ ​managers​ ​to​ ​monitor​ ​progress.

Rules:
- Presented​ ​as​ ​a​ ​bar​ ​chart​ ​showing​ ​schedules​ ​tasks​ ​over​ ​a​ ​given​ ​time​ ​scale
- Time​ ​is​ ​shown​ ​on​ ​the​ ​horizontal​ ​axis
- Each​ ​activity​ ​is​ ​shown​ ​by​ ​a​ ​separate​ ​horizontal​ ​bar
- Horizontal​ ​bars​ ​show​ ​the​ ​start​ ​and​ ​finish​ ​dates
- Critical​ ​and​ ​non​ ​critical​ ​activities​ ​are​ ​shown
- Predecessor-successor​ ​relationships​ ​are​ ​shown

Ultimate​ ​purpose​ ​is​ ​to​ ​identify​ ​the​ ​minimum​ ​amount​ ​of​ ​time​ ​needed​ ​to​ ​complete​ ​a​ ​project
➢ Identify​ ​all​ ​activities​ ​required​ ​for​ ​the​ ​completion​ ​of​ ​the​ ​project
➢ Break​ ​down​ ​the​ ​project​ ​into​ ​separate​ ​and​ ​clearly​ ​identifiable​ ​tasks
➢ Determine​ ​how​ ​long​ ​each​ ​of​ ​the​ ​tasks​ ​will​ ​take
➢ Identify​ ​all​ ​activities​ ​which​ ​cannot​ ​start​ ​until​ ​the​ ​completion​ ​of​ ​other​ ​tasks,​ ​dependencies
➢ Determine​ ​which​ ​tasks​ ​can​ ​take​ ​place​ ​concurrently
1.7​ ​Organizational​ ​Planning​ ​Tools

Constraints​ ​on​ ​strategic​ ​planning:

→​ ​Availability​ ​of​ ​finance​ ​ ​ ​ ​→​ ​Organizational​ ​Culture​ ​ ​ ​ ​→​ ​Dynamics​ ​of​ ​Workforce​ ​ ​ ​ ​ ​→​ ​External​ ​Constraints