Company’s economic and financial

management
Content
1. Entrepreneurial Initiatives and Business Creation Opportunities.............................3
1.1. CONCEPT OF ECONOMICS. ECONOMIC SYSTEMS. ROLE OF THE
COMPANY: UNIT OF PRODUCTION. MARKETS. THIRD PARTIES RELATED
TO THE COMPANY: SUPPLIERS, CUSTOMERS, PUBLIC ADMINISTRATIONS,
FINANCIAL INSTITUTIONS, AMONG OTHERS. STAKEHOLDER GROUPS:
EMPLOYEES, OWNERS, INVESTORS, THIRD PARTIES, AMONG OTHERS.. . .3
1.1.1. Economic systems.......................................................................................3
1.1.2. Stakeholders of the company.......................................................................4
1.2. BUSINESS PLAN: THE BUSINESS IDEA......................................................5
1.2.1. Sections of a Business Plan:........................................................................5
1.3. THE FEASIBILITY PLAN................................................................................6
1.4. KEY FACTORS OF ENTREPRENEURS: INITIATIVE, CREATIVITY, AND
EDUCATION................................................................................................................6
1.5. ENTREPRENEURIAL ROLE AS AN EMPLOYEE IN A SME AND
ENTREPRENEURIAL ROLE AS AN ENTREPRENEUR.........................................8
1.6. BASIC FUNCTIONS OF A COMPANY...........................................................8
1.7. THE COMPANY AS A SYSTEM......................................................................9
1.8. CORPORATE CULTURE: CORPORATE IMAGE. CORPORATE SOCIAL
RESPONSIBILITY.......................................................................................................9
1.8.1. Elements of Corporate Culture..................................................................10
1.8.2. Corporate Image........................................................................................10
1.8.3. Corporate Social Responsibility (CSR).....................................................10
1.9. ANÁLISIS OF THE GENERAL AND SPECIFIC ENVIRONMENT OF AN
SME 11
1.10. RELATIONSHIPS OF AN SME WITH ITS ENVIRONMENT AND
SOCIETY AS A WHOLE............................................................................................13
1.11. Activities:......................................................................................................13
1.11.1. Multiple Choice Questions (MCQs)......................................................13
1.11.2. True/False Statements............................................................................15
1.11.3. Activity 1: Vocabulary Matching...........................................................16
1.11.4. Activity 2: Fill in the Blanks..................................................................16

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 1.11.5. Activity 3: Critical Thinking Discussion...............................................17
1.11.6. Activity 4: Reflective Question.............................................................18
1.11.7. Activity 5: Reflective Question on Avocado Production and Water
Scarcity 18
1.11.8. Activity 6: Integrated Business Project.................................................18
1.12. Unit Summary: Business Fundamentals and Environmental Impact............20
1.12.1. Unit Outline:..........................................................................................20
1.12.2. Unit Assessment: Integrated Business Project.......................................21
1.12.3. Key Takeaways:.....................................................................................21

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 1. Entrepreneurial Initiatives and Business Creation
Opportunities
1.1. CONCEPT OF ECONOMICS. ECONOMIC SYSTEMS. ROLE OF THE
COMPANY: UNIT OF PRODUCTION. MARKETS. THIRD PARTIES
RELATED TO THE COMPANY: SUPPLIERS, CUSTOMERS, PUBLIC
ADMINISTRATIONS, FINANCIAL INSTITUTIONS, AMONG
OTHERS. STAKEHOLDER GROUPS: EMPLOYEES, OWNERS,
INVESTORS, THIRD PARTIES, AMONG OTHERS.
Economics is a social science that studies the behaviour of economic agents and the
allocation of resources among them.
Two branches can be distinguished within economics:

Branch Field of Study Studied Variables

Behaviour of economic
Supply, demand, production,
agents (individuals,
Microeconomics competitive markets, price
households, firms, and
equilibrium.
markets).
Total production, price level,
Behaviour of the economy
Macroeconomics employment, wages, exchange
as a whole.
rates, and interest rates.

1.1.1. Economic systems

In any society, from the earliest primitive communities to the present day, individuals
have needed to organize themselves around a system of values and economics that
distributes resources among all members of the society.
The scarcity of resources compels making decisions about the allocation of these
resources based on three fundamental questions: what to produce, how to produce it,
and for whom to produce it.
The answers to the above three questions distinguish one economic system from
another. Thus, they can be classified into three different forms of organization: market
economy, planned economy, and mixed economy.
A market economy is a system in which decisions are made by the market as the
primary economic agent. Decisions are based on prices. In this system, the state has
minimal intervention, only establishing a legal framework to ensure free competition.
This is the case in the United States currently.
A planned economy is the opposite of the previous system. In this type of organization,
the state decides on the three questions mentioned earlier. Hence the term "planned." It
is the system traditionally used in communist countries, where the distribution of
resources was decided by the state itself through a system, typically five-year plans, that
determined what should be produced, in what quantity, and how to distribute it. This

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was the operating system of socialist economies, which now only remains in countries
like China or Cuba.
A mixed economy is the current system prevailing in most countries around the world.
In this system, the market allocates resources, but the state intervenes to regulate and
address the failures that the market itself generates. In this case, unlike in a market
economy, the state assumes a greater number of functions. This is the system in most
Western countries. Spain is a clear example, with a welfare system provided by the
state, which ensures income redistribution and a more equitable allocation of resources.
In the current economic system, the mixed economy, the company is a fundamental
economic unit. Through it, productive resources are channelled to transform them into
valuable goods for the market.
The company carries out a production and/or commercialization task in which, starting
from factors known as inputs (capital, land, and labour), it generates products or
services, referred to as outputs. These outputs create wealth in the sense that the value
of these obtained outputs in the market is greater than the cost of the factors used.
1.1.2. Stakeholders of the company
The stakeholders of a company are those who are interested in or are somehow affected
by the activities it undertakes.
Stakeholders have always existed, but it's true that nowadays their influence is much
greater due to increased access to information and more impactful communication. They
can be categorized as either internal or external stakeholders, based on whether they are
part of the company itself or merely interact with it.

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 1.2. BUSINESS PLAN: THE BUSINESS IDEA
The business idea is the first step to initiate any project.
Various factors lead anyone to start a business initiative, but among them, the following
are commonly found:
• The personal characteristics of the entrepreneur, which are understood as their
idiosyncrasy.
• The opportunities identified in the market.
The business idea is the product or service that one intends to offer in the market.
How do ideas arise?
Business ideas do not emerge by chance. Generally, opportunities are identified due to
the following factors:
• The academic background of the entrepreneurs.
• Business experience.
• Social changes.
• Technological advancements.
Society itself is an inexhaustible source of resources. There is a feedback loop between
what social changes can contribute to the realm of business ideas, and how these ideas,
in turn, bring about those changes.
As evident as it may be, the idea alone is not a guarantee of success in the market, no
matter how intriguing it might seem initially. That's why it's necessary to thoroughly
describe, evaluate, and ascertain its viability.
The business idea should be developed in a document called a business plan, which will
outline the intended entrepreneurial project, examining its economic, financial, and
technical feasibility.
In today's world, the definition of the idea and the way it is put into practice, as
conveyed in the business plan, serves as an introduction to entities that might take an
interest in the company. To secure financing, it is an indispensable tool.
1.2.1. Sections of a Business Plan:
1. Objectives and Introduction of Project Promoters.
2. Description of Company Activity, Product, and Market.
3. The Market (Potential Customers and Competitors).
4. Marketing Plan (Commercial Strategies).
5. Production Plan (Production Process, Supply Chain, Quality Control, etc.).
6. Location.
7. Organization and Personnel.
8. Investment and Financing Plan (Sources of Funding, Investments, Income and
Cost Forecasts).

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9. Formal Aspects (Legal Structure and Obligations, Administrative Procedures).
1.3. THE FEASIBILITY PLAN
One of the key elements of the business plan is the feasibility plan, which aims to
determine the economic and financial viability of the project, i.e., whether it will yield
profits.
It is an essential tool for assessing the viability of a newly established company, as well
as for evaluating projects that established businesses want to undertake. This allows
informed and timely decision-making.
The feasibility plan is a document that simulates the operation of the company over a
period of time to demonstrate the economic viability of the project. It should include the
following information:
• Planned investments and their sources of financing. Determine the type of
investment to be made and when, as well as identify the sources of financing
(external or internal) that will be used to obtain the necessary resources, along
with the financial costs associated with these funding sources. These elements
will be reflected in the company's balance sheet.
• Projected sales: projected income and expenses (operating costs, financial costs,
etc.) Calculate the breakeven point or the profitability threshold of the company
and demonstrate whether the projected sales exceed or fall short of it. For an
accurate analysis of the period's situation, revenues and expenses will be
summarized in a document called an income statement.
• Determine when the projected cash flows occur. Based on estimated revenue and
expense operations, cash inflows (receipts) and outflows (payments) for each
established period will be documented. These receipts and payments will be
outlined in the cash flow budget, and through its analysis, it can be determined
whether there is sufficient liquidity to continue business operations.
This feasibility plan, included within the business plan, is typically created with a time
horizon of three to five years. For a positive project viability, the following conditions
must be met:
• The financing budget must cover the investment budget.
• The projected income statement forecasts must be positive.
• Cash flow must have positive liquidity every year and every month of the first
year.
You can explore the free business plan development tool provided by the Directorate-
General for Industry and Small and Medium Enterprises (DGIPYME). It also allows for
experimenting with various economic scenarios.
1.4. KEY FACTORS OF ENTREPRENEURS: INITIATIVE, CREATIVITY,
AND EDUCATION
According to Schumpeter, "the entrepreneur is an innovator who implements change in
markets through the realization of new combinations that can take various forms,"
including:

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 • Opening new markets.
• Introducing a new product.
• Introducing a new production method.
What are the key factors of an entrepreneur?
The question, as challenging to answer as the entrepreneurial journey itself, can be
narrowed down by analysing the entrepreneurial profile of successful businesspeople
who, sharing a series of qualities, have chosen self-employment—a path that can be
riskier in certain aspects than being employed by someone else.
Among the key factors that define an entrepreneur, the following can be found:
1. Initiative: Entrepreneurs are known for taking the initiative to identify opportunities
and act upon them. They are proactive and willing to take calculated risks to achieve
their goals.
2. Creativity: Entrepreneurship often involves thinking outside the box, coming up with
innovative solutions, and being adaptable in a rapidly changing business environment.
3. Education: A solid foundation of knowledge and skills, often acquired through formal
education or continuous learning, can greatly contribute to an entrepreneur's success.
4. Resourcefulness: Entrepreneurs are skilled at finding and utilizing resources
effectively, whether it's capital, networking opportunities, or information.
5. Persistence: The road to success is rarely smooth, and entrepreneurs need to be
persistent in the face of challenges and setbacks.
6. Vision: Having a clear vision and long-term goals can help guide an entrepreneur's
decisions and actions.
7. Adaptability: The ability to adapt to changing circumstances and market conditions is
crucial for staying relevant and competitive.
8. Leadership: Entrepreneurs often need to lead and inspire others, whether it's their
team, customers, or partners.
9. Networking: Building a strong network of contacts and relationships can open doors
to new opportunities and collaborations.
10. Resilience: The ability to bounce back from failures and setbacks is a hallmark of
successful entrepreneurs.
11. Time Management: Entrepreneurs must effectively manage their time and prioritize
tasks to make the most of their resources.
12. Customer Focus: Understanding and meeting customer needs is essential for
creating a successful product or service.
13. Risk Management: While entrepreneurs are willing to take risks, they also need to
be prudent in managing and mitigating potential risks.
14. Financial Literacy: Understanding financial concepts and managing finances
effectively is crucial for the sustainability and growth of a business.
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These key factors, combined with determination, dedication, and a strong work ethic,
contribute to the success of entrepreneurs in their ventures.
1.5. ENTREPRENEURIAL ROLE AS AN EMPLOYEE IN A SME AND
ENTREPRENEURIAL ROLE AS AN ENTREPRENEUR
It's possible for a person to possess entrepreneurial skills and attitudes to start their own
project, but for various reasons, they might find themselves working under the direction
of an employer, that is, as an employee for an entrepreneur.
Profiles of employees with entrepreneurial traits are clearly distinguishable, as they
exhibit qualities such as initiative, leadership, and creativity, even though they might be
limited by being accountable to their superiors.
On the other hand, these employees are often considered highly productive, offering
their opinions, suggesting changes and improvements in various aspects of business
activities (sales, production, etc.), and volunteering to lead or participate in different
projects that the company wishes to undertake.
While their attitude within the organization is typically positive their desire might be to
become independent and start their own business.
In this way, the employee-turned-entrepreneur might eventually become a business
owner if they engage in commercial activities. Upon making this transition, the
entrepreneur will face new challenges, drawing upon everything learned during their
time as an employee. At this point, the entrepreneur will need to assume the risk of all
decisions made, which is a distinctive characteristic compared to being an employee,
where the business owners bear the risks within the company where one is employed.
1.6. BASIC FUNCTIONS OF A COMPANY
The basic functions represent the activities that a company undertakes to carry out its
operations. These functions are interrelated, and the proper coordination of these
functions is essential for the optimal functioning of the company as a production unit.
1. Management Function: Responsible for coordinating the technical and financial
resources of the company, setting strategic directions, and defining objectives. Planning,
organizing, coordinating, and controlling are the fundamental tasks of this function.
2. Financial Function: Involves researching and analysing potential financing and
investment avenues to facilitate the company's activities. Planning resources, studying
the feasibility of financial operations, and making investment decisions are part of its
tasks.
3. Administrative Function: Handles all tasks related to the documentation management
of the company.
4. Production Function: Pertains to the production of goods, transforming raw materials
into finished products for sale. This function does not apply to commercial enterprises
that offer already finished products. Research and Development (R&D), quality control,
and inventory management are activities within this function.

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5. Sales and Marketing Function: Responsible for buying and selling activities.
Designing products based on consumer needs, setting prices, selecting distribution
channels, and conducting marketing communications are part of the broad tasks of this
department.
6. Human Resources Function: This department is responsible for personnel
management. Recruitment, selection, hiring, and employee training are among its tasks.
These functions collectively ensure the efficient operation of a company, from
conceptualizing and creating products to marketing and selling them and managing the
internal workforce and financial resources. Coordination among these functions is
essential for the success of the business.
1.7. THE COMPANY AS A SYSTEM
The theory of systems, which initially may not seem related to organizational and
business management, has been employed to describe, through its principles, the
composition and behaviour of a company.
A system can be defined as a collection of units or objects that interact and coordinate
with each other to achieve a goal.
A company is a collection of interrelated elements (human, technical, financial, etc.)
that interact with each other and with the environment to which they belong.
As a system, a company has the following characteristics:
• Artificial, created for a specific purpose and interest.
• Open to the environment.
• Complex due to its composition of subsystems.
• Social in nature.
The environment influences the company through factors of production: labour,
technology, energy, machinery, materials, capital, etc.
The company receives these inputs, transforms them, and provides products and
services to the environment, which results in its own profits. Simultaneously, it
contributes to society through social benefits in the form of taxes and information.
To achieve its corporate objectives, the company obtains inputs from the market,
integrates them into its production and marketing system, and delivers outputs to the
market with added value.
1.8. CORPORATE CULTURE: CORPORATE IMAGE. CORPORATE
SOCIAL RESPONSIBILITY
Culture refers to a set of traits that characterize a society. The term "culture" is also used
within the business context, identifying the combination of values, attitudes, and ideas
that shape the personality of the organization and should be embraced by all its
members.
Culture serves to address two issues through the performance of two primary functions:

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 • External adaptation function: Through culture, a company adapts to its
environment.
• Internal integration function: Creating cohesive teams and fostering collective
action.
Internal communication, hiring practices, customer service, among other aspects, are
influenced by organizational culture. This culture is transmitted to new members of the
organization and defines the philosophy and ideology prevailing within the
organization.
1.8.1. Elements of Corporate Culture
Corporate culture encompasses three key elements:
• Mission: Defines the company's philosophy and the purpose of its activities. For
example, IndeepLearning's mission is to provide quality education to enable
individuals to become the best professionals for top companies.
• Vision: Acts as the guiding compass for the organization's activities. Continuing
with the example of IndeepLearning, its vision is to be a reference school in
professional education, generating high added value. This objective should guide
all activities carried out.
• Values: Represent the attitudes that shape the company's policies and guide its
interactions with stakeholders. For IndeepLearning, these values include
commitment to society, integrity, innovation, and student orientation, among
others.
Corporate culture plays a pivotal role in shaping the identity and behaviour of an
organization, both internally and externally. It influences how the company is perceived,
how it operates, and how it engages with its employees, customers, and the broader
community.
1.8.2. Corporate Image
Corporate image is closely related to corporate culture. It represents how the company is
perceived by its stakeholders in the environment.
How is corporate image generated?
• Spontaneously: Through the company's interactions with its stakeholders,
perceptions about the company are formed.
• Intentionally: The company deliberately acts through communication campaigns
to convey its values to society. This is known as positioning, aimed at creating a
specific image.
1.8.3. Corporate Social Responsibility (CSR)
As an open system, a company not only takes from the environment what it needs, but
also contributes both negative and positive elements to the environment through its
activities. Regulatory frameworks govern business activities to control and manage their
potential negative impacts. For instance, there are environmental laws on energy
efficiency for factories or regulations on toxic waste disposal.

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However, Corporate Social Responsibility (CSR) goes beyond legal requirements and
emerges from the company's own initiative. It responds to the growing awareness in
society, particularly in terms of social and environmental aspects.
CSR involves businesses voluntarily taking steps to positively impact society and the
environment. It includes initiatives to address issues such as poverty, education,
environmental sustainability, and fair labour practices. CSR activities aim to contribute
positively to the well-being of communities, promote ethical business practices, and
enhance the company's reputation.
By engaging in CSR, companies demonstrate their commitment to ethical behaviour and
social well-being. It reflects a recognition of the broader impact and responsibilities that
companies have beyond their financial performance. CSR not only benefits society and
the environment, but it can also lead to increased customer loyalty, better employee
morale, and improved long-term business sustainability.
1.9. ANÁLISIS OF THE GENERAL AND SPECIFIC ENVIRONMENT OF
AN SME
As previously discussed, a company is not an isolated entity but interacts with
everything around it. This is referred to as the business environment.
Understanding a company without considering its relationship with the environment is
impossible.
The company's environment is divided into two categories:
• General environment: affects all companies to a similar extent, indirectly.
• Specific environment: directly influences the company.
The analysis of both the general and specific environment is crucial for a
comprehensive understanding of the factors that impact a small or medium-sized
enterprise (SME).
1. General Environment Analysis: This involves examining external factors that have a
broad impact on all businesses, regardless of their industry or location. Some key
components of the general environment include:
1.1. Economic Factors: Trends in the overall economy, such as economic growth,
inflation, and unemployment rates, can significantly impact an SME's
operations and performance.
1.2. Social Factors: Demographic trends, cultural shifts, and changes in consumer
behaviour can influence the demand for a company's products or services.
1.3. Technological Factors: Innovations and advancements in technology can create
opportunities for SMEs to improve their efficiency, develop new products, or
enhance customer experiences.
1.4. Political and Legal Factors: Government policies, regulations, and changes in
laws can affect business operations, trade, and compliance requirements.
1.5. Environmental Factors: Growing awareness of environmental issues can impact
an SME's practices, especially those related to sustainability and resource
management.

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 1.6. Global Factors: International events and trends can have ripple effects on
SMEs, especially those involved in global trade.

2. Specific Environment Analysis: This involves examining external factors that

directly affect a particular SME. These factors are more specific to the industry,
market, and geographic location of the company. Key components of the specific
environment include:
2.1. Competitors: Analysing the competitive landscape helps SMEs understand their
rivals, their strengths, weaknesses, and strategies, which can inform their own
business decisions.
2.2. Customers: Understanding customer preferences, needs, and buying behaviours
is crucial for SMEs to tailor their products and services effectively.
2.3. Suppliers: The availability, reliability, and cost of suppliers can impact an
SME's supply chain and overall operations.
2.4. Regulatory Environment: Industry-specific regulations, permits, and
compliance requirements can significantly shape an SME's operations.
2.5. Local Community: The relationship with the local community and its
perception of the SME can influence customer loyalty, reputation, and
community support.
2.6. Partnerships and Alliances: Collaborations with other businesses or
organizations can offer growth opportunities and access to new markets.

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Analysing both the general and specific environment helps SMEs identify opportunities
and threats, develop strategies, and adapt to changing conditions. It allows them to make
informed decisions that contribute to their long-term success and sustainability.
1.10. RELATIONSHIPS OF AN SME WITH ITS ENVIRONMENT AND
SOCIETY AS A WHOLE
The acronym SME (Small and Medium-sized Enterprise) refers to companies with
fewer than 250 employees and an annual turnover equal to or less than 50 million euros.
SMEs are the most widespread type of businesses in Spain, and therefore, their impact
and interaction with the environment are vital for the business and social ecosystem we
live in. As seen in the graph, micro-enterprises constitute the majority of the business
environment, while only 1% of companies are considered large enterprises.
Maintaining positive relationships with the environment is not only key to an SME's
success but also to its survival. The dynamic and global environment in which SMEs
operate presents challenges that they must navigate in their business development.
Companies face challenging circumstances, but it's true that public institutions strive to
create an ecosystem that reduces tax pressure, enhances research and development, and
facilitates hiring.
The digital transformation is a reality in today's businesses, changing how companies
interact with society and manage their operations. This transformation is beneficial for
enabling companies to export their products.
Many companies have invested in management software and utilize cloud applications.
They communicate with their suppliers, customers, and society at large through
technological means. This tech-enabled communication contributes to efficiency and
effective collaboration.
SMEs play a significant role in the economy and society, not just in terms of
employment and economic contribution but also in their interaction with the
community, their ability to innovate, and their adaptability to changing circumstances.

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Maintaining strong relationships with both the immediate environment and society as a
whole is crucial for their continued success and growth.
1.11. Activities:
1.11.1. Multiple Choice Questions (MCQs)
1. What is the primary objective of the corporate image?
a) To increase employee satisfaction
b) To generate higher profits
c) To shape public perception
d) To reduce production costs

2. What term is used for businesses with fewer than 250 employees and an annual
turnover of up to 50 million euros?
a) Large corporations
b) Mega-companies
c) Micro-enterprises
d) Small and Medium-sized Enterprises (SMEs)

3. Which component of the business environment refers to factors that affect all
companies indirectly and to the same extent?
a) Specific environment
b) Dynamic environment
c) General environment
d) Local environment

4. What is the purpose of Corporate Social Responsibility (CSR)?

a) To maximize shareholder profits
b) To comply with legal regulations only
c) To generate negative impacts on the environment
d) To positively impact society and the environment

5. What is the role of the entrepreneur in a business?

a) To create a market economy
b) To manage the macroeconomic environment

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 c) To innovate and implement change
d) To enforce legal regulations

6. Which term describes a business's efforts to manage its interactions with the external
world?
a) Corporate identity
b) Market positioning
c) Stakeholder management
d) Cultural adaptation

7. What is the primary function of the financial department within a company?

a) Handling administrative tasks
b) Managing employee relations
c) Investigating customer preferences
d) Analysing financing and investment options

8. What term is used for a business's ability to adapt to changes in the environment and
operate effectively?
a) Market positioning
b) Cultural integration
c) Business sustainability
d) Financial analysis

9. How does the digital transformation impact business operations?

a) It reduces the need for employee training
b) It simplifies regulatory compliance
c) It changes communication methods and enhances efficiency
d) It eliminates the need for financial analysis

10. What function is responsible for coordinating resources and setting strategic
objectives in a company?
a) Marketing department
b) Human resources department

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 c) Production department
d) Management function

1.11.2. True/False Statements

1. True or False: Corporate culture is unrelated to a company's values and attitudes.

2. True or False: The specific environment influences a particular company in a more

indirect manner.

3. True or False: Corporate Social Responsibility (CSR) is solely about legal

compliance.

4. True or False: Entrepreneurship involves only innovation and creativity.

5. True or False: The digital transformation has no impact on how businesses

communicate with society.

1.11.3. Activity 1: Vocabulary Matching

Match the following business terms with their definitions.

1. Entrepreneur
2. Corporate Social Responsibility (CSR)
3. Micro-enterprise
4. General environment
5. Stakeholder
6. Digital transformation
Definitions:
a) A person who initiates and manages a business venture, taking risks for potential
profits.
b) The process of using digital technologies to transform business operations and
interactions.
c) The responsibilities of a company towards society and the environment beyond
legal obligations.
d) A small-scale business with fewer than 250 employees and limited turnover.
e) Factors that affect all companies indirectly and to the same extent.
f) Individuals or groups that have an interest or influence in a company's activities.

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 1.11.4. Activity 2: Fill in the Blanks.
Fill in the blanks with the appropriate business terms.
The _________________ environment affects all companies indirectly and to the same
extent.
Corporate Social Responsibility (CSR) involves a company's responsibilities towards
_________________ and the environment.
An _________________ is an individual who initiates and manages a business venture.
The ___________________ department analyzes financing and investment options.
The ___________________ transformation changes how businesses interact with
society.
The _________________ function is responsible for coordinating resources and setting
objectives.
_________________ is a business's efforts to manage interactions with the external
world.
Solution:
General
society
entrepreneur
financial
digital
Management
Stakeholder management
1.11.5. Activity 3: Critical Thinking Discussion
Reflect on the following question and provide your thoughts in a short paragraph.
Question: What potential consequences could arise for a society if it predominantly
consists of micro-enterprises instead of large corporations? Consider economic, social,
and technological aspects in your response.
Solution:
The predominance of micro-enterprises in a society could have multifaceted
consequences. From an economic perspective, a landscape dominated by micro-
enterprises might lead to fragmented markets with limited economies of scale. This
could potentially hinder innovation and investment in research and development due to
resource constraints. On the social front, a prevalence of micro-enterprises might result
in fewer employment opportunities compared to larger corporations, impacting job
stability and social benefits. Moreover, a higher number of smaller entities could lead to
weaker bargaining power, potentially affecting labor conditions and workers' rights. In
terms of technology, limited resources could hinder the adoption of advanced
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technologies and digital transformation, potentially impeding overall economic growth.
Therefore, while micro-enterprises contribute to diversity and local empowerment, a
balance with larger corporations might ensure a more resilient and well-rounded
economic ecosystem.
1.11.6. Activity 4: Reflective Question
Consider the role of Corporate Social Responsibility (CSR) in business. Reflect on the
following question and provide your insights in a brief paragraph.
Question: Why is Corporate Social Responsibility (CSR) important for businesses in
today's society? How can CSR initiatives benefit both companies and the communities
they operate in?
Solution:
Corporate Social Responsibility (CSR) is vital for businesses in today's society as it
goes beyond profit-making and addresses the broader impact of business activities.
Engaging in CSR initiatives demonstrates a company's commitment to ethical practices,
sustainability, and community well-being. By investing in social and environmental
causes, businesses can enhance their reputation, build trust with stakeholders, and attract
socially-conscious consumers. Furthermore, CSR initiatives contribute to community
development, improving living conditions, education, and healthcare. This, in turn,
fosters a positive relationship between the company and the local community, leading to
long-term mutual benefits. Ultimately, embracing CSR aligns business goals with
societal interests, creating a win-win scenario that promotes business success and
contributes to a more inclusive and responsible society.
1.11.7. Activity 5: Reflective Question on Avocado Production and Water Scarcity
Consider the production of avocados in a country with low water reserves. Reflect on
the following question and provide your insights in a short paragraph.
Question: How might the cultivation of avocados in a country with limited water
resources impact the environment, local communities, and the economy? Consider the
water-intensive nature of avocado farming and its potential effects on water scarcity,
agricultural practices, and the overall well-being of the nation.
Solution:
The cultivation of avocados in a country with low water reserves can have far-reaching
consequences. The water-intensive nature of avocado farming might exacerbate water
scarcity issues, impacting both the environment and local communities. Increased water
usage for irrigation could lead to the depletion of groundwater sources and negatively
affect ecosystems and wildlife. Moreover, the diversion of water for avocado production
could compete with other essential uses like drinking water and agricultural needs.
Additionally, water scarcity may hinder agricultural diversification, affecting food
security and economic stability. While avocado exports can boost the economy, heavy
reliance on a water-demanding crop might create an unsustainable cycle. Striking a
balance between economic gains and responsible water usage becomes crucial to ensure
the long-term sustainability of both the avocado industry and the nation as a whole.

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 1.11.8. Activity 6: Integrated Business Project
In groups of 3 or 4, engage in a brainstorming session to select a business idea. Once the
idea is chosen, develop the company's mission, vision, objectives, and values, along
with a basic organizational structure. Subsequently, conduct a comprehensive analysis
of the external and internal business environment. Utilize PESTEL analysis and Porter's
Five Forces framework to assess the potential opportunities and challenges for your
chosen business idea.
Example Solution:
Step 1: Brainstorming and Idea Selection
In a group of 4, we brainstormed various business ideas and collectively decided to
create a sustainable, organic food delivery service focusing on locally sourced produce.
Step 2: Defining Mission, Vision, Objectives, and Values
Mission: To provide fresh, healthy, and sustainably sourced organic food to our
community while minimizing our environmental footprint.
Vision: To become the preferred choice for conscious consumers seeking convenient
access to nutritious and eco-friendly food options.
Objectives:
1. Establish partnerships with local farmers within the first year.
2. Achieve a 20% reduction in plastic packaging within two years.
3. Serve 1,000 households with our organic food delivery service in the first six
months.
Values: Sustainability, Quality, Community, Transparency.
Step 3: Organizational Structure
- CEO & Co-Founder
- Operations Manager
- Marketing Manager
- Procurement Manager
Step 4: External and Internal Analysis
PESTEL Analysis:
- Political: Government support for local agriculture could be an advantage.
- Economic: Growing demand for organic products suggests a promising market.
- Sociocultural: Increasing consumer awareness of health and sustainability
benefits aligns with our mission.
- Technological: Integration of efficient delivery systems enhances convenience
for customers.
- Environmental: Focus on eco-friendly practices strengthens our brand identity.
- Legal: Compliance with food safety regulations is crucial for customer trust.
Porter's Five Forces:

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 1. Threat of New Entrants: Moderate due to potential market growth, but brand
reputation and partnerships act as barriers.
2. Bargaining Power of Suppliers: Low as we collaborate closely with local
farmers.
3. Bargaining Power of Buyers: Moderate; customers have alternatives, but our
unique value proposition sets us apart.
4. Threat of Substitutes: Low, as few alternatives offer the same convenience and
commitment to sustainability.
5. Competitive Rivalry: Increasing due to emerging organic food delivery services,
requiring strong differentiation.
By conducting this analysis, we gained insights into the opportunities and challenges
our sustainable organic food delivery service might face. This exercise helped us refine
our business strategy and make informed decisions.
1.12. Unit Summary: Business Fundamentals and Environmental Impact
This unit explored essential concepts in business management and their impact on the
environment and society. Key topics included entrepreneurship, economic systems,
company functions, corporate culture, and the interplay between businesses and their
surroundings. The unit emphasized the importance of responsible practices and
understanding the dynamic relationship between businesses, society, and the
environment.
1.12.1. Unit Outline:
1. Introduction to Business and Economics
- Definition of economics and its branches (microeconomics, macroeconomics).
- Economic systems: market economy, planned economy, mixed economy.
- Entrepreneurship and its role in creating opportunities and value.
2. Functions of a Business
- Business functions: direction, finance, administration, production, marketing, human
resources.
- Business as a system: interrelated elements and their roles.
- Corporate culture: mission, vision, values, and their impact on behavior and
decision-making.
3. Interaction with the Environment
- Business in society: stakeholders, internal and external environment.
- Business relationships: customers, suppliers, competitors, regulatory bodies.
- Corporate Social Responsibility (CSR) and its importance for ethical and sustainable
business practices.
4. Strategic Planning and Analysis
- Business planning: mission, vision, objectives, values.

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 - Environmental analysis: PESTEL framework (Political, Economic, Sociocultural,
Technological, Environmental, Legal).
- Industry analysis: Porter's Five Forces (Threat of New Entrants, Bargaining Power of
Suppliers, Bargaining Power of Buyers, Threat of Substitutes, Competitive Rivalry).
1.12.2. Unit Assessment: Integrated Business Project
Students engage in group activities that simulate real-world business scenarios. They
brainstorm a business idea, define its mission, vision, objectives, and values, create a
basic organizational structure, and conduct external and internal analyses using PESTEL
and Porter's Five Forces frameworks. This project enhances critical thinking, decision-
making skills, and understanding of the interconnections between business and the
environment.
1.12.3. Key Takeaways:
- Businesses operate within various economic systems, influencing their functions and
strategies.
- A company's functions, culture, and relationships with stakeholders shape its
performance.
- Businesses must consider their social and environmental impact through responsible
practices.
- Strategic planning and analysis tools help assess opportunities and challenges in the
business environment.

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