U )

6
I

IN SS

INTRODUCTION INTO BUSINESS ADMINISTRATION

☐ : success of a
company sales
products , corporation,
organisation
, ,
•
cultural science

A : data /numbers ,
models

• formal science
S : new
strategy ,
market
entry strategy cooperation,

we need science to _ . . .

1.) Function to describe

→ describe certain circumstances , workflows or issues , numbers in sales

2.) Function to analyse

→
analyse situations problems intonation in find
general and
or
, a solution to it

3.) Function to create / shape

create and ideas and and form them into
→
shape new
projects work on them to a
reality

&
go
£
To customer
supply or
0
•

directly involved in the

physical selling of the product

selector

I. DEFINITION OF BUSINESS

Business is the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs.

A business must...
- be organized
- satisfy needs
- earn profit

Factors of production = goods used in the creation/production of g&s

- Elementary factors -> Material, Assets, Labour

- Dispositive work performance -> mental human work (organizing, planning, management…)

(1) Classic/macroeconomic perspective: labor, land and capital

(2) Classic operational production factors/business perspective (Gutenberg)
(3) Mixed approaches, explaining and tracing resource integration processes

Ultimate goal in business: to satisfy the needs of the firm’s customers

 Maslow's
hierarchy needs
of

needs &
motivation behavior

&

impuls
(e.g. certain needs are
most
deficitneeds
producto ffer esteem,
love/belonging, safetyand
->

physiological needs

employee motivation (singles, parents...

·

most basic met

customer
(buying buying needs mustbe
·

motivation or not
·

product development individual's

pyramid
->
desire focusses on l evel
next needs
of in the

different needs can be atthe time,

processed same
butone certain level
needs dominates the human
of

BUSINESS PROFIT

> profit is part of value creation („Wertschöpfung“) and requires the creation of value sales revenue reward for shareholders:

expenses profit to investi n the future

Value creation = Revenue - Input Performances

sales revenue

- revenue -> profit, taxes, interest, labour costs/wages, input performances for shareholders:
loss -> risk
expenses

being paid
- -
·
not

losing entire investment

expenses

II. PRINCIPLES OF ECONOMIC RATIONALISM

1. HOMO ECONOMICUS

> unlimited rational behavior

> Customers: striving for maximization of consumption
> Producers: striving for profit maximization

> it is assumed that

- complete information exists
- perfect market transparency exists

2. SCARCITY OF GOODS -> needs are always bigger then what we have available in our world (e.g gas shortage)

> economical principle requires that resources available must be used strictly in economic terms, I.e companies must work efficiently and effectively to
obtain optimal results

Efficiency = doing sth. withleast

lost amount of waste
Effective = good attainment - reaching a goal

3. MINIMIZIATION PRINCIPLE

> principle of minimum input (with least amount of resources) and a desired (given) output

4. MAXIMIZATION PRINCIPLE

> principle of maximum return (= largest possible output) and given imput

5. OPTIMIZATION PRINCIPLE

> principle of optimization aims for the highest degree of efficiency of the output
 III. MEASURING ECONOMIC BEHAVIOR OF BUSINESSES

1. PRODUCTIVITY

pCs
labour his

pCs
mach. has

pCs

m3

2. (BUSINESS) EFFICIENCY RATE 1:Wirtschaftlichheit)

also: sales/revenu:a mountof COS sold x sales prices

also costs amountof inputs input prices

x

3. PROFITABILITY/RENTABILITY/RETURN-ON-X

margine product pricemeet

Isales to increasesaleor more

so thatcustomers buy products)
↑Netincome income -
intrest

2
Interest Intereston deptcapital
=

·
Total assets
equitycapital deptcapital

4. KEY MEASURES OF ECONOMIC BEHAVIOR

productivity output10
business
efficiency ("Wirtschaftlichkeit) evaluatedoutpotIncomes to
end

profitabilityrentability equitytoincomesets/revenueon

Whatinfluences economic behavior and business (externally)?

competative environment (secter/industry

Political/global
·

environment
Economic environment
·

PE :
S T
·

social and societal environment

Technological environment
: :
·

+
"
economical system

i m
L
(

i a\

IV. TYPES OF ECONOMIC SYSTEMS

Economics = study of how wealth is created and distributed

- Individuals, business firms, government ents and society deal with scarcity when making important decisions

1. THE 4 ECONOMIC QUESTIONS

 2. FACTORS OF PRODUCTION -> resources used to produce goods and services

- land and natural resources, labor, capital, entrepreneurship

→
combines factors in an effective way

freie Mar utwirtschatt &

capitalism pianwihsohattlantraluerwaltungsw.PE
a

( free market economy ) command

) economy
• Ussr
capitalistic market ( P""" owned
mixed → e.
g- Germany
economy
economy
(state directed economy )
(1723-1790) socialist centralised economy (state owned )
Adam Smith
◦
Wealth of nation (177-6)
•

guided by interaction of buyers + sellers with role of government

account
→
Invisible hand being taken into Karl Marx
answer (1818-1883)
→
society 's interests are best served when the individuals
•
interaction of households , businesses
and
governments long term all economic
together
within that
→
vision classless citizens own
allowed
:

society are to
pursue their own whose
4 society
self -

interest economic
questions resources

and allows economic freedom but

•

protects private property decides what will be produced and who

still interfere to achieve social aims

→
government , from whom and now
g&s ,

government can
and controls the factors of production
owns major
→ It B 6 taxes 6
gives services like health t social
security structure
give making
+
,
◦ hierarchical decision -

→
individuals decide what /who / how much / for whom
economic plan
centralised information processing , bureaucracy
'
decides and distribution
government all legal production
.

◦
Hous holds : Individuals , Customers of G8S . .
. .

based on 4 fundamental issues :

•
Businesses : -

exchange money for resources , / abort capital to produce 68s

1 .

Right to create wealth

Business household income
profit
-

become
and
private property
resources hous holds
2.
Right to own -

invest in businesses or lend

money
3. Right to economic freedom to
compete
to limited intervention
4. Right government
•
Social
security system
•

}
Laissez-faire capitalism
•
•

minimum
government interference
no
wage CE
☒ based state
on the
concept of a ( free ) market owned
economy
°
-

companies
→ business and individuals decide what to produce relative
pricing

{
•

and
buy
→ market determines
quantities sold and
prices FME ◦

private ownership
•

decentralized , decision
cooperative
-

making

V. MEASURING ECONOMIC PERFORMANCE

1. GROSS DOMESTIC PRODUCT (GDP)

• measures economic well-begin of a nation

• facilitates comparison of economic performance between nations due to standardizing guidelines for economic accounting
• takes inflation into account

Purchasing Power Parity (PPP) = economic term for measuring prices at different locations
• based on law of price -> if there are no transaction costs nor trade barriers for a particular good, then price should be the same everywhere
• Idea is that consumers in every location will have the same purchasing power

2. PRODUCTIVITY (macroeconomic perspective)

3. OTHER IMPORTANT ECONOMIC INDICATORS

• unemployment rate -> percentage of a nation’s labor force unemployment at any time
• Inflation rate -> general rise in the level of prices
• corporate profits
• National income
• consumer price/confidence index
• New housing starts….
VI. BUSINESS CYCLE

1. DEFINITION AND IMPLICATIONS

2. MAGIC SQUARE OF ECONOMIC POLICY (in Germany)

•
describes an economic system for 4 economic
goals

☆
high employment
A

stability
•
price
external balance
☆

Contini us
"
•
economic
growth

VII. MARKETS & TYPES OF COMPETITION

1. THE LAW OF DEMAND

-> Buyers will purchase (demand) more of a product as its price drops and less of a product as its price increase

2. THE LAW OF SUPPLY

-> Producers will offer (supply) more of a product for sale as its price rises and less of product as its price drops

3. THE EQUILIBRIUM OF DEMAND AND SUPPLY

a=b

equilibrium
price and
b
quantity

4. PERFECT MARKET, MONOPOLISTIC MARKET, OLIGOPOLY AND MONOPOLY

1.) large number of buyers + sellers

'

small sellers in
competition ,
no
big seller with significant influence

2.) slightly different products

do
still
homogeneous products
but not
.

many sell → similar but

3.) Only few

. firms ,
3- 5 dominant firms are considered the norm
either competition or collaboration → use market influence to set the
price and maximize their
profit
.

in turn

4.) -1 seller →
single firm controls entire market
 CONSTITUTIVE DECISIONS IN BUSINESS
His
I.WHAT IS MANAGEMENT process with feedback loops
→
MR HR FR , ,
IR
functions :
,
Basic

E-
☐
Planning
•

E
Organizing
•

&
Leading Motivating
.

'
§
§
controlling
.

( Steve runs )

To
µ know how
raw materials + money to keep
' -

who
People provide organisation
physical objects running knowledge how we
'

on

labor for and combine

wages on other resources
salaries to make
G8S

II. GOALS

V5 .

1. Communication
2. Coordination
3. Motivation
4.
Measurable performance and entities
for employees

Types of GOALS :

} SMART mess →
goals and
objectives should be formulated SMART in order to create impact

4. ORIGIN OF GOALS - STAKEHOLDERS

5. EFFECT OF THE SHAREHOLDER STRUCTURE ON THE COMPANY
GOALS

Interests of equity investors:

• Capital preservation (minimum wage)
• Increase in value (e.g. rising share prices)
• Dividend
• Co-determination rights
• Ethical rights

-> Shareholder (value) approach: corporate strategy in which the board of

directors is expected to increase (maximize) the value of the company in terms of
the market value of its equity through all measures it develops and implements in
its company

6. Stakeholder Management: Groups of interest in a company

Owners/investors: Customers:

• most important stakeholder • very important stakeholder

• Key interest: high revenue with low production cost • Key interest: good value for money

• a company has different internal and external groups who’s interests are being balanced by the (business) management
• each group makes a contribution to the enterprise -> necessary that groups interest are taken into account
• otherwise -> too low wages, low interest rates, poor delivery conditions

Suppliers:
• payment of reasonable market prices for materials, energy,
inputs snd other input goods
• reliable payment and delivery practices Society:
• Steady and long-term business relationship • social commitment
• Environmentally friendly production and products
• creation of safe workplaces and secure jobs

Employees: Government/State:
• work/life balance • payment of Taxes and fees
• Income -> reasonable wages and salaries • Conduct in compliance with the law
• co-determination rights • creation of secure jobs
• Working hours, location…

Creditors (dept capital investors)

• capital preservation
• Informal rights
• appropriate interest rate (= cost of borrowing fund)
• control rights
III. ETHICS & SOCIAL RESPONSIBILITY IN BUSINESS

Business is the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs

• must be organized
• satisfy needs
• earn profit

1. DEFINITION OF ETHICS IN THE BUSINESS CONTEXT

• fairness and honesty

• Personal advantages
• communication, esp. advertising
• bribery and money laundering
• Conflict of interest

2. FACTORS AFFECTING ETHICAL BEHAVIOUR: individual, social, opportunity

• Individual Factors -> individual knowledge, values, goals

• Social Factors -> cultural norms, actions and decisions of co-working, attitudes of significants others (e.g. friends, spouse, club...)
• Opportunity -> amount of freedom an organization affords, existing and missing consequences for unethical behavior

5. DEFINITION OF SOCIAL RESPONSIBILITY

Economic model of social responsibility -> shareholders

Pro con
• firms exist only to produce g&s and provide jobs
• all obligations towards others are fulfilled tax payments
• society benefits the most
• sr is job of someone else (e.g. state) • business is part of our society
• Business managers are responsible
-> corporate sr (CSR) costs money! primarily to stockholders’ investments
• business has the technical, financial and
managerial resources to tackle today’s
Complex social issues • corporate time, money and talent
Socioeconomic model of social responsibility -> Stakeholders should be used to maximize profits

• firms exist as responsible actors • can prevent increased goverment intervention

• social problems affect society in
• Have responsibility to all stakeholders including general public general, so individual businesses
• business can create a more stable
• societal wellbeing is responsibility of all actors in society should not be expected to solve these
environment for long-term profitability
-> CRS create value (e.g. reputation, builds communities, cuts long-term environmental costs problems
 V. FORMS OF LEGAL OWNERSHIP

• determines legal framework of a company + internal and external organization of a company

• regulates relationship between the shareholders (owners)
• serves the security in legal transactions

Regulates...
• liability, financing opportunities, profit and loss sharing, tax burdens…

Grindings sake
•
Organizational meeting
☒ stockholder
rights • Financial
rights
articles of
"
" " " " "^
incorporation subordinated claim
profits
" """r
voting rights
on
into stock
and receiving common :
adopt bylaws
→ ,
→ to →

the
→
requires approval by reflect first board of →
voting →
preferred stock : no voting rights ,
but receipt of dividend payments
of state directions →
secretary attending proxy
board
→
after approval becomes → members are
directly
responsible to stockholders
contract (corporate charter)

→
US =
one
-

tier
system → board of directors ( chairman & CE0 )

guids

→
Germany
= two - Her system →
supervisory boardi-Tma.ge ment board

appoints hire
stockholders
elect
of directors •
corporate officers •
employees
•
•
board
report
help board to make
set
goals
•

plans
represent stockholders
◦

responsibility
•
7. CORPORATE GROWTH

Reasons:
• greater profits
• To keep pace within a growing economy
• means by executives to boost their power, prestige and reputation

Growth through M&As:

1. Horizontal merger -> automotive (Volkswagen) automotive (Porsche)
2. Vertical merger -> automotive (Volkswagen) supplier (Knorr-Bremse)
3. Conglomerate merger -> automotive (Volkswagen) different industry (wirecard)

Franchising:
e.g. MC Donald, Tschibo, Marriott…

Franchise = a license to operate an individually owned business as though it were part of a chain to outlets or stores

VI. GLOBAL AND INTERNATIONAL BUSINESS

1. ABSOLUTE AND COMPARATIVE ADVANTAGE - THE BASIC

Some countries are better equipped with natural resources or its labour supply
• Saudi Arabia -> oil
• South Africa -> diamonds
• Australia -> wool

Absolute advantage:
• liability to produce a specific product more efficiently than any other nation

Comparative advantage:
• liability to produce a specific product more efficiently than any other product

2. EXPORTING AND IMPORTING

Exporting: selling and shipping raw materials or products to other nations

Importing: purchasing raw materials or products in other nations and bringing them into one’s own country

Trade surplus: Nation of positive trade balance

(E.g. 2020 China, Germany, Russia)

Trade deficit: Nation of negative trade balance

(E.g. 2020 U.S, U.K, India)
 3. METHODS OF ENTERING INTERNATIONAL BUSINESS

4. RESTRICTIONS TO IB

Tariffs/duty = a tax levied on a particular foreign product entering a country

• revenue tariffs, protection tariffs, dumping

Nontariff barriers = a non-tax levied by government

• import quota, embargo, foreign-exchange control , current devaluation

Cultural barriers = can impede acceptance of products in foreign countries

• address specific cultural needs, be aware of cultural clangers (color, reputation..)

I. FUNDAMENTAL THOUGHTS ON ORANIZING

1. WHY BUSINESSES AND MARKETS?

• they are economic institutions of coordination and exchange needed due to division of labour and specialization

Economic Behavior = rational decision-making on the utilization of scarce resources to meet given objectives

2. TRANSACTION COSTS (THEORY) Ronald H. Coase ( bike example)

…includes
• Initiation costs (travel, establishing new suppliers..)
• Agreement/contracting costs (negotiation costs)
• Processing costs (management costs)
• Control costs (costs of quality and deadline monitoring)
• Adjustment/fitting costs
…for services
value
in the environment directly creating
goal minimize costs of
exchanging
resources
:
not
•

managing
these inside the
organization ,

products
i
•
intonation selling '

% ↑
•
I feedback
'

negotiation customer
company
-
-
.

•
transport

revenue
II. ORGANIZING AN ENTERPRISE

1. UNDERSTANDING OF ORGANIZATION

Institutional
understanding
>

" "
an
enterprise is an
organization
> Instrumental understanding
"
"

enterprise has
organization
an
an

organizational structure ,
process organization

2. MICRO ORGANIZATION

Task : ( comprises a
target performance to be achieved
by means of activities

type of activities (
e.g .

production) •
location
•

object ( e. g. raw material ) material

◦ resources

hierarchy
•

person
•

phase
• time

purpose relationships
•

0 ☒

Organizational structure Process

organization

Position /Job

smallest organizational unit of an enterprise

>
Positions :
long-term bundles of tasks
,
independent from specific individuals

do that
> competence : CAN ! this person

perform task
>
Responsibility duty :
to do a
job or a in a
goal-oriented manner

> Authority

Accountability obligation of the to

:
>
employee accomplish assigned task /
an
job
 / Distribution of Rights
Delegation Decision

As

manager responsibility , authority , accountability worker