Professional Documents
Culture Documents
Types of Business:
There are three major types of businesses:
1) Service Business;
A service type of business provides intangible products (products with no physical form).
Service type firms offer professional skills, expertise, advice, and other similar products.
Examples of service businesses are: salons, repair shops, schools, banks, accounting firms, and
law firms.
2) Merchandising Business;
This type of business buys products at wholesale price and sells the same at retail price. They
are known as "buy and sell" businesses. They make profit by selling the products at prices
higher than their purchase costs.
A merchandising business sells a product without changing its form. Examples are: grocery
stores, convenience stores, distributors, and other resellers.
3) Manufacturing Business;
Unlike a merchandising business, a manufacturing business buys products with the intention
of using them as materials in making a new product. Thus, there is a transformation of the
products purchased.
A manufacturing business combines raw materials, labor, and factory overhead in its
production process. The manufactured goods will then be sold to customers.
Hybrid Business;
Hybrid businesses are companies that may be classified in more than one type of business. A
restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a
cold bottle of wine (merchandising), and fills customer orders (service).
Nonetheless, these companies may be classified according to their major business interest. In
that case, restaurants are more of the service type – they provide dining services.
1) Sole Proprietorship;
A sole proprietorship is a business owned by only one person. It is easy to set-up and is the
least costly among all forms of ownership.
The owner faces unlimited liability; meaning, the creditors of the business may go after the
personal assets of the owner if the business cannot pay them.
The sole proprietorship form is usually adopted by small business entities.
2) Partnership;
A partnership is a business owned by two or more persons who contribute resources into the
entity. The partners divide the profits of the business among themselves.
In general partnerships, all partners have unlimited liability. In limited partnerships, creditors
cannot go after the personal assets of the limited partners.
3) Corporation;
A corporation is a business organization that has a separate legal personality from its owners.
Ownership in a stock corporation is represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited involvement in the
company's operations. The board of directors, an elected group from the stockholders, controls
the activities of the corporation.
In addition to those basic forms of business ownership, these are some other types of
organizations that are common today:
Cooperative;
A cooperative is a business organization owned by a group of individuals and is operated for
their mutual benefit. The persons making up the group are called members. Cooperatives may
be incorporated or unincorporated.
Some examples of cooperatives are: water and electricity (utility) cooperatives, cooperative
banking, credit unions, and housing cooperatives.
1) Apple; Apple is a technology industry it has brand value of $ 205.5 B. its 1yr value change
is 12%. Its brand revenue is $265.8 B.
2) Google; Google is a technology industry. It has a brand value of $ 167.7 B. Its 1 yr change
value is 27%. It has a brand revenue of $ 136.2B. its company advertising is $ 6.4 B.
3) Coca Cola; It’s a beverage (Soft drinks) industry. It has a barand value of $167.7 B. Its 1
yr change value is 11%. Its brand revenue is $ 23.8 B and its company advertising is $ 4.1 B.
4) Disney; It’s a leisure (Movie) Industry. It has a brand value of $ 53.1B and its 1 yr value
change is 10%. Its brand revenue is $ 33.8 B and company advertising is $ 2.8 B.
5) Toyota; Its an automotive Industry. Its brand value is $ 4.6 B and its 1 yr value change is
0%. It has a brand revenue of $ 190.8 B and its company advertising is $ 4.6 B.
Course Objectives
1) Meaning of Business;
A business is an organization where people work together. In a business, people work to make
and sell products or services. A business can earn a profit for the products and services it offers.
The word business comes from the word busy, and means doing things.It works on regular
basis. Business means continuous production and distribution of goods and services with the
aim of earning profit under uncertain market condition.
Small Business; A small business is an independently owned and operated company that is
limited in size and in revenue depending on the industry. A local bakery that employs 10 people
is an example of a small business. A manufacturing facility that employees less than 500 people
is an example of a small business.
2) Business Studies;
Business Studies is an academic subject taught in schools and at university level in many
countries. Its study combines elements of accountancy, finance, marketing, organizational
studies and economics. Business Studies is a broad subject in the Social Sciences, allowing the
indepth study of a range of specialties such as accountancy, finance, organisation, human
resources management and marketing.
Finance: Finance is defined as the management of money and includes activities like
investing, borrowing, lending, budgeting, saving, and forecasting. ... Corporate finance also
includes the tools and analysis utilized to prioritize and distribute financial resources.
Marketing; Marketing is the process of interesting potential customers and clients in your
products and/or services. The key word in this marketing definition is "process"; marketing
involves researching, promoting, selling, and distributing your products or services.
Economics: Economics is the study of how society uses its limited resources. Economics is
a social science that deals with the production, distribution, and consumption of goods and
services. Macroeconomics - the branch of economics that studies the overall working of a
national economy. According to Robbin “Economics is the science which studies human
behavior as a relationship between given ends and scarce means which have alternative uses”.
alongside students from around the world on a range of challenging projects. Your views and
experiences will be different, and may even clash. To get the grade you’ll have to analyze cases,
diplomatically respond to conflicting opinions, and master the art of making your point.
4) Unlock the entrepreneur inside you: Leave your mark on the world ;
More and more, students go to business school to learn how to launch their dream business.
Being your own boss has many perks, but becoming a successful entrepreneur demands
creativity, innovation, and a strong execution strategy. Going to the right business school will
develop your entrepreneurial skills and enable you to test launch your ideas. Who knows you
may even meet your future business partner in class.
“Studying a business degree can strengthen your project management capabilities.”
Why study business? To be relevantly connected. To be part of the global generation. Most of
all, to set yourself up for any future imaginable.
3 reason why studying of business studies is important;
1) It teaches us effective business skills i.e. how to earn, manage and invest resources
2) It provides us with basic understanding of various activities of business
3) It teaches us how we can be our own boss
4) It enables to know more about office procedures and practices such as interpersonal
communication , public relation, record keeping etc.
Wages; A fixed regular payment earned for work or services, typically paid on a daily or
weekly basis. A wage is monetary compensation (or remuneration, personnel expenses, labor)
paid by an employer to an employee in exchange for work done.Wages are part of the expenses
that are involved in running a business. The essential difference between a salary and wages is
that a salaried person is paid a fixed amount per pay period and a wage earner is paid by the
hour. Someone who is paid wages receives a pay rate per hour, multiplied by the number of
hours worked. This person is considered to be a non-exempt employee. Wage is money paid to
a worker for work performed, or the price you pay for doing something wrong or unwise. If
you make $10 per hour at work, this is an example of your wage. If the consequences of a lie
is punishment, this is an example of a time when the wages of lies are punishment.
Commission; Commission is the amount of money an employee earns when they sell
something: In addition to his salary, he gets a 1% commission on each sale. A commission is a
sum of money that is paid to an employee upon completion of a task, usually the task of selling
a certain amount of goods or services. It can be paid as a percentage of the sale or as a flat
dollar amount based on sales volume, A commission may be paid in addition to a salary or
instead of a salary.A commission is generally a percentage of the sales price of an item. For
example, if a salesperson receives a 10% commission on their sales and sells $1500 worth of
merchandise, they would earn $150 in commissions. commission is a sending or mission (to
do or accomplish something) while salary is a fixed amount of money paid to a worker, usually
measured on a monthly or annual basis, not hourly, as wages implies a degree of
professionalism and/or autonomy.
Bonus; A sum of money added to a person's wages as a reward for good performance. A
bonus payment is usually made to employees in addition to their base salary as part of their
wages or salary. ... Thus bonus payments can act as incentives for managers attracting their
attention and their personal interest towards what is seen as gainful for their companies'
economic success. Bonus pay is also used to improve employee morale, motivation, and
productivity. When you tie bonuses to performance, it can encourage employees to reach their
goals, which in turn helps the company reach its goals. Employees are devastated when they
don't receive a promised salary bonus. Bonus in businsess is a monetary payment made to an
employee over and above their standard salary or compensation package. Bonuses are one of
the ways employers reward their employees for a job well done. And offering regular,
significant bonuses is a way to keep your best people from looking elsewhere for a job.
Industry
A group of bussinesses that all produce similar products is called an industry. For example auto
mobile manufacturers and automobile part manufacturers are are auto mobile industry. An
industry is a group of companies that are related based on their primary business activities. In
modern economies, there are dozens of industry classifications, which are typically grouped
into larger categories called sectors.
Individual companies are generally classified into an industry based on their largest sources of
revenue. For example, while an automobile manufacturer might have a financing division that
contributes 10% to the firm's overall revenues, the company would be classified in the
automaker industry by most classification systems. There are four types of industry. These are
primary, secondary, tertiary and quaternary
Primary Industry; Industry, such as mining, agriculture, or forestry, that is concerned with
obtaining or providing natural raw materials for conversion into commodities and products for
the consumer. Examples include mining, quarrying, farming, fishing and forestry, all of which
produce raw materials that can be processed in to a finished product. People working in these
industries are described as being in the primary sector. Secondary industries are the
manufacturing and assembly industries.
Secondary Industry; Industry that converts the raw materials provided by primary
industry into commodities and products for the consumer; manufacturing industry. Secondary
industries are those that take the raw materials produced by the primarysector and process them
into manufactured goods andproducts. Examples of secondary industries include heavy
manufacturing, light manufacturing, food processing, oil refining and energy production.
Tertiary Industry; The tertiary industry is the segment of the economy that provides
services to its consumers, including a wide range of businesses such as financial institutions,
schools and restaurants. It is also known as the tertiary sector or service industry/sector. The
tertiary industry is one of three industry types in a developed economy, the other two being the
primary, or raw materials, and secondary, or goods production, industries. As an economy
becomes more developed, it shifts its focus from primary to secondary and tertiary industries.
Sales, repair services, banking, and insurance are all part of the tertiary industry. People who
work in the tertiary sector include workers in the tourism and hospitality industry, doctors,
couriers, and business consultants. Some tertiary industries have close ties with the primary
and secondary industries.
Quaternary Industry; The use of modern technology in research and development to train
and provide information to other industries. The sector of industry that involves the intellectual
services: research, development, and information. It is considered the fourth basic industry.
Some industries in the quaternary sector are consultancy, financial planning, designing,
information technologies, research and development (R&D) and generation of information.
Primary resources, manufacturing, agriculture and construction are losing significant ground,
automation and innovation has transformed the entire world. The engines of growth are
dependent on the Quaternary sector, knowledge-based part of the economy.Why the quaternary
industry is important for economic growth
Special Considerations;
Stocks within the same industry often rise and fall as a group, because the same macroeconomic
factors affect all members. These can include changes in market sentiment on the part of
investors, such as those based on a response to a particular event or piece of news, as well as
changes directed specifically towards the specific industry, such as new regulations or
increased raw material costs.
However, events relating to just one particular business can cause the associated stock to rise
or fall separately from others within the industry. This can be the result of events including,
but not limited to, a differentiating product release, a corporate scandal in the news or a change
in leadership structures.
Key Takeaways;
1) Similar companies are grouped together into industries, and there are a number of different
industries, such as department stores and shoemakers.
2) Industry grouping is based on the primary product that a company makes are sells.
Meanwhile, industries are grouped together into sectors.
3) The North American Industry Classification System is the standard classification system
used by government agencies to organize companies into sectors or industries.
such as rubber and plastic footwear and department stores. Nike Inc. and the Target Corporation
are members of the same consumer goods sector, but each would be listed in a different industry
based on the specifics of the products they produce or sell. Nike is classified within the rubber
and plastics footwear industry (NAICS Code 3021), while Target is classified within the
department stores industry (NAICS Code 45211).
The North American Industry Classification System (NAICS), developed by the United States,
Canada, and Mexico, is the standard upon which government agencies classify businesses
when compiling statistical data. In the NAICS hierarchy, companies that use similar production
processes are categorized in the same industry. Global Industry Classification Standard (GICS)
is also a commonly referenced classification system.
Influences of Business:-
Marketing
External
Objective
Factors
and strategy
Internal and
External
Influences
Accounting Human
and finance Resources
Production
and
Operations
management
1) Marketing;
Market Analysis;
MA market analysis is a quantitative and qualitative assessment of a market. It looks into the
size of the market both in volume and in value, the various customer segments and buying
patterns, the competition, and the economic environment in terms of barriers to entry and
regulationarket Analysis;
Market Analysis
• Market Size
• Market Segments
Marketing Strategy
• Objectives of Business
• Niche versus Mass Marketing
• Marketing Portfolio
Market Research
• Primary and Secondary
Market size;
The number of individuals in a certain market who are potential buyers and/or sellers of a
product or service. Companies are interested in knowing the market size before launching a
new product or service in an area. market size in terms of a pyramid that includes three layers:
Total Market, Served Market, and Target Market.
Total market is referred to as the area of coverage for which there is a demand for given
product. All the companies try to have their presence in the entire market to capture maximum
market share. Total Quality Management. Served Market,a company's served available
market is the portion of the total available market that their product or service fills. The total
available market is the total of all unit sales of all competing products. Target marketing
involves breaking a market into segments and then concentrating your marketing efforts on one
or a few key segments consisting of the customers whose needs and desires most closely match
your product or service offerings.
Market segments;
Market segmentation is the process of dividing a market of potential customers into groups, or
segments, based on different characteristics. The segments created are composed of consumers
who will respond similarly to marketing strategies and who share traits such as similar interests,
needs, or locations.
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1) Demographic segmentation;
Demographic segmentation is defined as a market segmentation method based on variables
such as age, gender, income etc. Demographic attributes like age, sex, gender, religion, and
educational qualification, play an important role in research.
2) Psychographic segmentation;
Psychographic segmentation has been used in marketing research as a form of market
segmentation which divides consumers into sub-groups based on shared psychological
characteristics, including subconscious or conscious beliefs, motivations, and priorities to
explain and predict consumer behavior.
3) Behavioral segmentation;
Behavioral segmentation is defined as the process of dividing the total market into smaller
homogeneous groups based on customer buying behavior. Behavioral segmentation is done by
organizations on the basis of buying patterns of customers like usage frequency, brand loyalty,
benefits needed, during any occasion etc.
4) Geographic segmentation.;
Geographic segmentation is a common strategy when you serve customers in a particular area,
or when your broad target audience has different preferences based on where they are
located.This marketing approach is common for small businesses that serve a wide
demographic customer base in a local or regional territory.
Marketing Strategies;
A marketing strategy refers to a business' overall game plan for reaching prospective consumers
and turning them into customers of the products or services the business provides. A marketing
strategy contains the company’s value proposition, key brand messaging, data on target
customer demographics, and other high-level elements.
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generally hold consistent over the long haul. In other words, marketing strategies cover big-
picture messaging, while marketing plans delineate the logistical details of specific campaigns.
Academics continue to debate the precise meaning of marketing strategy, therefore multiple
definitions exist. The following quotes help crystallize the nuances of (modern) marketing
strategy:
"The sole purpose of marketing is to sell more to more people, more often and at higher prices."
(Sergio Zyman, marketing executive and former Coca-Cola and JC Penney marketer)
"Marketing is no longer about the stuff that you make, but about the stories you tell." (Seth
Godin, former business executive and entrepreneur)
"The aim of marketing is to know and understand the customer so well the product or service
fits him and sells itself." (Peter Drucker, credited as founding modern management)
“Marketing’s job is never done. It’s about perpetual motion. We must continue to innovate
every day.” (former vice chair and chief marketing officer, GE)
"Take two ideas and put them together to make one new idea. After all, what is a Snuggie but
the mutation of a blanket and a robe?" (Jim Kukral, speaker and author of "Attention!")
Objectives of Business;
The business objective is a goal, i.e. where the business wants to reach in the future. For
example, a business wants to set up its franchise in another state in the next 3 years or it wants
to increase its workforce in the coming months.
Business needs objectives, without objectives the business is like a car without headlights
driving blind. Objectives of business are the purpose for which the business is established and
performed. We can call objectives the cornerstone of every business.
Objectives are needed in every area where performance and results directly affect the survival
and prosperity of a business. The right choice of objectives is critical for the success of the
business. The objectives of a business can be classified into two main categories, which are
1)Economic objectives
2)Social objectives
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We learned in the previous topic that business is an economic activity. Hence, its purpose is to
show economic results. Let’s understand the economic objectives of the business. They are as
follows:
1) Profit Earning;
Business is a set of activities undertaken with the prospect of sale for the purpose of earning a
profit. Profit is the extra income over the expenses. The main objective of any business is to
earn a profit. Just as a plant cannot survive without water, similarly a business cannot sustain
without profit.
Profit is necessary for growing and expanding business activities. Profit guarantee a consistent
stream of capital for the modernization and augmentation of business activities in the future.
Profits likewise show the scale of stability, efficiency, and advancement of the business
organization.
4) Increasing Productivity;
Productivity is a scale to measure the efficiency of the business activity. It is usually the last
objective but just as important because productivity is measured by the output given by the
activities. It is the end result of any business activity. Each business must go for more prominent
productivity – to guarantee its survival and development. This goal can be accomplished by
decreasing wastages and making proficient utilization of machines and supplies, HR, cash and
so forth.
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According to Dayton Hudson “The business of business is serving society, not just making
money.” Business is one of the pillars on which the society stands. Therefore, it is a part of the
society. In fact, it cannot thrive without the resources from the society. The business earns its
income from the sale of products and services to the society. It is mandatory on the part of the
business to take care of the social factors. The necessary social objectives of a business are as
follows:
2) Employment Generation;
One of the major problem today’s generation facing is unemployment. Business generates
employment. Therefore, it is the social objective of a business to give chances to beneficial
employment to individuals of the society. In a nation like India, unemployment has turned into
a critical issue.
4) Community Service;
Business must give back something to the society. As a result, the Library, dispensary,
educational foundations and so on which a business can make and help in the advancement of
society are created. Business enterprises can build schools, colleges, libraries, hospitals, sports
bodies and research institutions. They can help non-government organizations (NGOs) like
CRY, Help Age, and others which render services to weaker sections of society.
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Mass marketing and niche marketing have too much difference. Both of these terms cannot be
categorized in one term. The most common difference is the size of the market that is targeted
by each term.
Niche marketing:
A niche marketer targets on the smaller groups of people. This person has not the capability of
dealing with a larger group of people. He deals with one person at a time.
Mass marketing:
Mass marketing is opposite to the niche marketing. In this term, one person deals with the
larger group of the people. He deals with a group of parents of people. If mass marketer deals
with group of parents, niche marketer will target single parent. This is the main difference
between these both terms.
In mass marketing, as we know that one has to deal with a group of people, it is some kind
of difficult process. If he has to show his handmade and natural product, he would go for the
group of parents. Then he is supposed to make segments and categories of these parents. In
first segment, the first category will be of married parents, in second there will be unmarried
parents then single parents and after that truly newly married parents. When the list of parents
will be categorized, he will make segments of each parent according to their age. Third step
comes to categories them according to their financial status. After this whole long and tiresome
process, this kind of marketer will go to do his task that he has to do.
On other hand, niche marketer is quite simple and easy. In this term, marketer deals only with
one person at a time. He does not need to make segments or categories. He can go anywhere
and in any market to achieve what he wants. He does not need to pass from any kind of long
term process to tell the healing techniques of his product.
Another noteworthy and great difference between both of these terms is that in mass
marketing, a person uses expensive ways and forms to reach to the media. Agencies and
marketers spend a big amount to give ad on television, radio and other sources like that. While
in niche marketing, a marketer uses snail mail or electronic mail to get his aim.
Markerting Portfolio;
A market portfolio is a theoretical bundle of investments that includes every type of asset
available in the investment universe, with each asset weighted in proportion to its total presence
in the market. The expected return of a market portfolio is identical to the expected return of
the market as a whole.
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billion. The market portfolio consists of each of these companies, which are weighed in the
portfolio as follows:
Company A portfolio weight = $2 billion / $20 billion = 10%
Company B portfolio weight = $5 billion / $20 billion = 25%
Company C portfolio weight = $13 billion / $20 billion = 65%
Key Takeaways;
1) A market portfolio is a theoretical, diversified group of every type of investment in the
world, with each asset weighted in proportion to its total presence in the market.
2) Market portfolios are a key part of the capital asset pricing model, a commonly used
foundation for choosing which investments to add to a diversified portfolio.
3) Roll's Critique is an economic theory that suggests that it is impossible to create a truly
diversified market portfolio—and that the concept is a purely theoretical one.
Market Research
The process of gathering, analyzing and interpreting information about a market, about a
product or service to be offered for sale in that market, and about the past, present and potential
customers for the product or service; research into the characteristics, spending habits, location
and needs of your business's target market, the industry as a whole, and the particular
competitors you face.
Accurate and thorough information is the foundation of all successful business ventures
because it provides a wealth of information about prospective and existing customers, the
competition, and the industry in general. It allows business owners to determine the feasibility
of a business before committing substantial resources to the venture.
Market research provides relevant data to help solve marketing challenges that a business will
most likely face--an integral part of the business planning process. In fact, strategies such as
market segmentation (identifying specific groups within a market) and product differentiation
(creating an identity for a product or service that separates it from those of the competitors) are
impossible to develop without market research.
Market research involves two types of data:
Primary information.
This is research you compile yourself or hire someone to gather for you. Data collected from
its source and generally gathered by a business for its own specific purposes. Primary market
research tends to take the raw data such as information collected through focus groups or
surveys, and interpret the data for a variety of business purposes.
When conducting primary research, you can gather two basic types of information: exploratory
or specific. Exploratory research is open-ended, helps you define a specific problem, and
usually involves detailed, unstructured interviews in which lengthy answers are solicited from
a small group of respondents. Specific research, on the other hand, is precise in scope and is
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used to solve a problem that exploratory research has identified. Interviews are structured and
formal in approach. Of the two, specific research is the more expensive.
Secondary information.
This type of research is already compiled and organized for you. Examples of secondary
information include reports and studies by government agencies, trade associations or other
businesses within your industry. Most of the research you gather will most likely be secondary.
Market research that's already compiled and organized for you. Examples of secondary
information include reports and studies by government agencies, trade associations or other
businesses within your industry.
Secondary research uses outside information assembled by government agencies, industry and
trade associations, labor unions, media sources, chambers of
commerce, and so on. It's usually published in pamphlets, newsletters, trade publications,
magazines, and newspapers. Secondary sources include the following:
Public sources These are usually free, often offer a lot of good information, and include
government departments, business departments of public libraries, and so on.
Commercial sources. These are valuable, but usually involve cost factors such as
subscription and association fees. Commercial sources include research and trade associations,
such as Dun & Bradstreet and Robert Morris & Associates, banks and other financial
institutions, and publicly traded corporations.
Marketing mix;
The marketing mix is a foundation model for businesses. The marketing mix has been defined
as the "set of marketing tools that the firm uses to pursue its marketing objectives in the target
market". Thus the marketing mix refers to four broad levels of marketing decision, namely:
product, price, place, and promotion.
Price; The amount of money charged for a product or service, or the sum of the values that
consumers exchange for the benefits of having or using the product or service
Place; Place in the Marketing Mix. As we've mentioned, place is the element of the marketing
mix that ensures that the product is distributed and made conveniently available for the
consumer - at the right location at the right time.This is why it is so important the product
makes it to the right place at the right time.
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Product; The marketing mix is a tool that is made up of four unique but interconnected and
interdependent variables. These are called the 4P's and are product, price, promotion, and place.
These four components help determine a clear and effective strategy to bring a product to
market.
Legal Structure
• Sole Proprietor
• Partnership
• Corporation
Business Objectives
• Mission Statements
• Starting Business
Stakeholders
• Customers
• Suppliers
• Employees
• Communities
SWOT Analysis
• Strengths, Weaknesses, Opportunities, and Threats
Legal structure;
These are the basic forms of business ownership:
1) Sole Proprietorship;
A sole proprietorship is a business owned by only one person. It is easy to set-up and is the
least costly among all forms of ownership.
The owner faces unlimited liability; meaning, the creditors of the business may go after the
personal assets of the owner if the business cannot pay them.
The sole proprietorship form is usually adopted by small business entities.
2) Partnership;
A partnership is a business owned by two or more persons who contribute resources into the
entity. The partners divide the profits of the business among themselves.
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In general partnerships, all partners have unlimited liability. In limited partnerships, creditors
cannot go after the personal assets of the limited partners.
3) Corporation;
A corporation is a business organization that has a separate legal personality from its owners.
Ownership in a stock corporation is represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited involvement in the
company's operations. The board of directors, an elected group from the stockholders, controls
the activities of the corporation.
Business Objectives;
Mission Statement;
A mission statement defines what an organization is, why it exists, its reason for being. At a
minimum, your mission statement should define who your primary customers are, identify the
products and services you produce, and describe the geographical location in which you
operate.
If you don't have a mission statement, create one by writing down in one sentence what the
purpose of your business is. Ask two or three of the key people in your company to do the same
thing. Then discuss the statements and come up with one sentence everyone agrees with. Once
you have finalized your mission statement, communicate it to everyone in the company.
It's more important to communicate the mission statement to employees than to customers.
Your mission statement doesn't have to be clever or catchy--just accurate.
If you already have a mission statement, you will need to periodically review and possibly
revise it to make sure it accurately reflects your goals as your company and the business and
economic climates evolve. To do this, simply ask yourself if the statement still correctly
describes what you're doing.
If your review results in a revision of the statement, be sure everyone in the company is aware
of the change. Make a big deal out of it. After all, a change in your mission probably means
your company is growing-and that's a big deal.
Once you have designed a niche for your business, you're ready to create a mission statement.
A key tool that can be as important as your business plan, a mission statement captures, in a
few succinct sentences, the essence of your business's goals and the philosophies underlying
them. Equally important, the mission statement signals what your business is all about to your
customers, employees, suppliers and the community.
The mission statement reflects every facet of your business: the range and nature of the
products you offer, pricing, quality, service, marketplace position, growth potential, use of
technology, and your relationships with your customers, employees, suppliers, competitors and
the community.
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Different stakeholders have different interests, and companies often face tradeoffs when trying
to please all of them.
Types of Stakeholders
This guide will analyze the most common types of stakeholders and look at the unique need
that each of them typically has. The goal is to put you in the shoes of each type of stakeholder
and see things from their point of view.
1) Customers;
Stake: Product/service quality and value
Many would argue that businesses exist to serve their customers. Customers are actually
stakeholders of a business in that they are impacted by the quality of service and its value. For
example, passengers traveling on an airplane literally have their lives in the company’s hands
while flying with the airline.
2) Employees;
Stake: Employment income and safety
Employees have a direct stake in the company in that they earn an income to support
themselves, as well as other benefits (both monetary and non-monetary). Depending on the
nature of the business, employees may also have a health and safety interest (for example,
transportation, mining, oil and gas, construction, etc.).
3) Investors;
Stake: Financial returns
Investors include both shareholders and debtholders. Shareholders invest capital in the business
and expect to earn a certain rate of return on that capital. Investors are commonly concerned
with the concept of shareholder value. Lumped in with this group are all other providers of
capital, such as lenders and different classes of shareholders.
5) Communities;
Stake: Health, safety, economic development
Communities are major stakeholders in large businesses. They are impacted by a wide range
of things, including job creation, economic development, health, and safety. When a big
company enters or exits a small community, they will immediately feel the impact on
employment, incomes, and spending in the area. In some industries, there is a potential health
impact, as companies may alter the environment.
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6) Governments;
Stake: Taxes and GDP
Governments can also be considered a major stakeholder in a business as they collect taxes
from the company (corporate income), as well as from all the people it employs (payroll taxes)
and other spending the company incurs (goods and services taxes). Governments benefit from
the overall Gross Domestic Product (GDP) that companies contribute to.
Stakeholder vs Shareholder
This is an important distinction to make. A stakeholder is anyone who has any type of stake in
a business, while a shareholder is someone who owns shares (stock) in a business and thus has
an equity interest.
SWOT Analysis;
SWOT analysis (or SWOT matrix) is a strategic planning technique used to help a person or
organization identify strengths, weaknesses, opportunities, and threats related to business
competition or project planning.[1] It is intended to specify the objectives of the business
venture or project and identify the internal and external factors that are favorable and
unfavorable to achieving those objectives. Users of a SWOT analysis often ask and answer
questions to generate meaningful information for each category to make the tool useful and
identify their competitive advantage. SWOT has been described as the tried-and-true tool of
strategic analysis,[2] but has also been criticized for its limitations (see § Limitations).
Strengths and weakness are frequently internally-related, while opportunities and threats
commonly focus on the external environment. The name is an acronym for the four parameters
the technique examines:
Strengths: characteristics of the business or project that give it an advantage over others.
Weaknesses: characteristics of the business that place the business or project at a disadvantage
relative to others.
Opportunities: elements in the environment that the business or project could exploit to its
advantage.
Threats: elements in the environment that could cause trouble for the business or project
Strengths and weaknesses (internal factors within an organization)
Human resources — staff, volunteers, board members, target population
Physical resources — your location, building, equipment
Financial — grants, funding agencies, other sources of income
Activities and processes — programs you run, systems you employ
Past experiences — building blocks for learning and success, your reputation in the community
Opportunities and threats (external factors stemming from community or societal forces)
Future trends in your field or the culture
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3) Human Resources;
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the direction of the business. In addition, top-level managers play a significant role in the
mobilization of outside resources
Middle manager; A middle manager is a link between the senior management and the
lower (junior) levels of the organization.Moreover, the middle manager is a channel of
communication within the organization, as they pass on major decisions of executives and the
main goals of an organization to lower levels of employees.
Frontline Managers; Frontline managers are the managerial foot soldiers, responsible for
many of an organization's critical day-to-day operations. They supervise other contributors, yet
they are usually the least experienced tier of managers in a company, often newly promoted
into their first leadership role.
Operatives; The operative functions are those tasks or duties which are specifically entrusted
to the human resource or personnel department. These are concerned with employment,
development, compensation, integration and maintenance of personnel of the organisation.
Democratic Leaders; The democratic leadership style consists of the leader sharing the
decision-making abilities with group members by promoting the interests of the group
members and by practicing social equality.Democratic leadership works best in situations
where group members are skilled and eager to share their knowledge.
Key Concepts
The core concept of MBO is planning, which means that an organization and its members are
not merely reacting to events and problems but are instead being proactive. MBO requires that
employees set measurable personal goals based upon the organizational goals. For example, a
goal for a civil engineer may be to complete the infrastructure of a housing division within the
next twelve months. The personal goal aligns with the organizational goal of completing the
subdivision.
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MBO is a supervised and managed activity so that all of the individual goals can be coordinated
to work towards the overall organizational goal. You can think of an individual personal goal
as one piece of a puzzle that must fit together with all of the other pieces to form the complete
puzzle: the organizational goal. Goals are set down in writing annually and are continually
monitored by managers to check progress. Rewards are based upon goal achievement.
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planning cannot be accurately forecast due to the constantly changing socio-economic and
technological environment which affect the stability of goals.
5. Most managers may not be sufficiently skilled in interpersonal interaction such as coaching
and counseling, which is extensively required.
6. The integration of MBO system with other systems such as forecasting and budgeting etc.,
is very poor. This makes the overall functioning of all systems mare difficult.
7. Group goal achievement is more difficult. When the goals of one deportment depend on the
goals of another department, cohesion is more difficult to obtain. For example, the production
department cannot produce a set quota if it is not sufficiently supplied with raw materials and
personnel.
4) Production/Operation Management
Production Methods
Economies of Scale
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state of attaining the maximum productivity, with least effort spent, effectiveness is the extent
to which something is successful in providing the desired result.
Take a read of the article to understand the difference between efficiency and effectiveness in
management.
Content: Efficiency Vs Effectiveness
1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion
Comparison Chart
BASIS FOR
EFFICIENCY EFFECTIVENESS
COMPARISON
Definition of Effectiveness
Effectiveness refers to the extent to which something has been done, to achieve the targeted
outcome. It means the degree of closeness of the achieved objective with the predetermined
goal to examine the potency of the whole entity.
Effectiveness has an outward look i.e. it discloses the relationship of the business organisation
with the macro environment of business. It focuses on reaching the competitive position in the
market.
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Effectiveness is result oriented that shows how excellently an activity has been performed that
led to the achievement of the intended outcome which is either accurate or next to perfect.
Key Differences Between Efficiency and Effectiveness
The points, given below describe the substantial differences between efficiency and
effectiveness:
1. The ability to produce maximum output with limited resources is known as Efficiency.
The level of the nearness of the actual result with planned result is Effectiveness.
2. Efficiency is ‘to do the things perfect’ while Effectiveness is ‘to do perfect things’.
3. Efficiency has a short run perspective. Conversely, the long run is the point of view of
Effectiveness.
4. Efficiency is yield-oriented. Unlike Effectiveness, which is result oriented.
5. Efficiency is to be maintained at the time of strategy implementation, whereas strategy
formulation requires Effectiveness.
6. Efficiency is measured in operations of the organisation, but Effectiveness of strategies
is measured which are made by the organisation.
7. Efficiency is the outcome of actual output upon given the number of inputs. On the
other hand, Effectiveness has a relationship with means and ends.
Conclusion
Efficiency and Effectiveness both have a prominent place in the business environment which
must be maintained by the organisation because its success lies on them. Efficiency has an
introspective approach, i.e. it measures the performance of operations, processes, workers, cost,
time, etc. inside the organisation. It has a clear focus on reducing the expenditure or wastage
or eliminating unnecessary costs to achieve the output with a stated number of inputs.
In the case of Effectiveness, it has an extroverted approach, that highlights the relationship of
the business organisation with the rest of the world to attain a competitive position in the
market, i.e. it helps the organisation to judge the potency of the whole organisation by making
strategies and choosing the best means for the attainment result.
Production Methods;
Production methods fall into three main categories: job (one-off production), batch (multiple
items, one step at a time for all items), and flow (multiple items, all steps in process at once
for separate items)
Job Production
Job Production is used when a product is produced with the labor of one or few workers and
is rarely used for bulk and large scale production. It is mainly used for one-off products or
prototypes (hence also known as Prototype Production), as it is inefficient; however, quality
is greatly enhanced with job production compared to other methods. Individual wedding
cakes and made-to-measure suits are examples of job production. New small firms often use
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job production before they get a chance or have the means to expand. Job Production is
highly motivating for workers because it gives the workers an opportunity to produce the
whole product and take pride in it.
Batch Production
Batch production is the method used to produce or process any product of the in groups or
batches where the products in the batch go through the whole production process together.
An example would be when a bakery produces each different type of bread separately and
each product(in this case, bread) is not produced continuously. Batch production is used in
many different ways and is most suited to when there is a need for a quality/quantity balance.
This technique is probably
the most commonly used method for organizing manufacture and promotes specialist labor,
as very often batch production involves a small number of persons. Batch production occurs
when many similar items are produced together. Each batch goes through one stage of the
production before moving onto next stage.
Flow Production
Flow production (Process Production) is also a very common method of production. Flow
production is when the product is built up through many segregated stages; the product is
built upon at each stage and then passed directly to the next stage where it is built upon again.
The production method is financially the most efficient and effective because there is less of
a need for skilled workers.
Lean Production
Contrary to job production, the method Boutique Manufacturing is suitable for the production
of very small to small batches, i.e. orders of a few units up to several dozens of similar or
equal goods. The workflow organization of a Boutique Manufacturing entity can be a mixture
of both jobbing and batch production but involves higher standardization than job production.
Boutique Manufacturing is often organized with single workplaces or production cells
carrying out a number of subsequent production steps until completion of certain components
or even the whole product; large assembly lines are generally not used. The flexibility and
variety of products able to be produced in the entity therefore are much higher than with the
more standardized method of batch production.
Economies scales;
What Are Economies of Scale
Economies of scale are cost advantages reaped by companies when production becomes
efficient. Companies can achieve economies of scale by increasing production and lowering
costs. This happens because costs are spread over a larger number of goods. Costs can be both
fixed and variable.
The size of the business generally matters when it comes to economies of scale. The larger the
business, the more the cost savings.
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Economies of scale can be both internal and external. Internal economies of scale are based on
management decisions, while external ones have to do with outside factors
Key Takeaways;
Economies of scale are cost advantages companies experience when production becomes
efficient, as costs can be spread over a larger amount of goods.
A business's size is related to whether it can achieve an economy of scale—larger companies
will have more cost savings and higher production levels.
Economies of scale can be both internal and external. Internal economies are caused by factors
within a single company while external factors affect the entire industry.
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