BUSINESS STRATEGY.

(related to other Management Functions).

Sisdjiatmo K. Widhaningrat.

SBM - ITB.
MM - FEB UI.

January 2022.
Sleep and Wake Up

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The Firm
A firm is a collection of resources that is transformed into
products demanded by consumers
• Profit is the difference between revenue received and costs
incurred
• Organization - A deliberate arrangement of people
assembled to accomplish some specific purpose (that
individuals independently could not accomplish alone).
• Common Characteristics of Organizations
• Have a distinct purpose (goal)
• Are composed of people
• Have a deliberate structure

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Characteristics of Organizations
Effectiveness and Efficiency.

Management involves coordinating and overseeing

the work activities of others so that their activities are
completed efficiently and effectively.

• Efficiency • Effectiveness
• “Doing things – “Doing the right
right” things”
• Getting the most – Attaining
output for the least organizational goals
inputs
Efficiency and Effectiveness in Management.
(Tergantung kinerja Group dan Team)
Four Functions of Management
Economics and managerial decision making
Managerial economics :
The use of economic analysis to make business decisions
involving the best use (allocation) of an organization’s
scarce resources

The economics of a business :

refers to the key factors that affect the firm’s ability to earn an
acceptable rate of return on its owners’ investment.
The most important of these factors are :
• Competition
• Technology
• Customers 8
Economics and
managerial decision making
• Relationship to other business disciplines

Marketing: demand, price elasticity

Finance: capital budgeting, breakeven

analysis, opportunity cost, value added

Management science: linear

programming, regression analysis, forecasting
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Economics and managerial decision making
• Relationship to other business disciplines

Strategy :
types of competition,
structure-conduct-performance
analysis

Managerial accounting:
Relevant cost, breakeven analysis, incremental
cost analysis, opportunity cost
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Economic goal of the firm
• Profit maximization hypothesis:
the primary objective of the firm (to economists) is to
maximize profits
Other goals include market share, revenue growth, and
shareholder value

• Optimal decision : is the one that brings the firm closest

to its goal
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Goals other than profit
• Economic goals

• market share, growth rate

• profit margin
• return on investment, Return on assets
• technological advancement
• customer satisfaction
• shareholder value
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Maximizing the wealth of stockholders
• Business risk involves variation in returns due to the ups and
downs of the economy, the industry, and the firm
All firms face business risk to varying degrees.

• Financial risk concerns the variation in returns that is

induced by ‘leverage’.

Leverage is the proportion of a company financed by debt

 the higher the leverage, the greater the potential
fluctuations in stockholder earnings
 financial risk is directly related to the degree of leverage
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Economic terms
• Microeconomics is the study of individual consumers and producers in
specific markets, especially:
• supply and demand
• pricing of output
• production process
• cost structure
• distribution of income
• Macroeconomics is the study of the aggregate economy, especially:
• national output (GDP)
• unemployment
• inflation
• fiscal and monetary policies
• trade and finance among nations 14
Economic terms
• Scarcity is the condition in which resources are not available to
satisfy all the needs and wants of a specified group of people
• Opportunity cost is the amount (or subjective value) that must
be sacrificed in choosing one activity over the next best
alternative
• Allocation decisions must be made because of scarcity. Three
choices:
What should be produced?

How should it be produced?

For whom should be produced?

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Review of economic terms
• Economic decisions of the Firm
What - begin or stop providing
goods/services (production)
How - hiring, staffing, capital budgeting
(resourcing)
For whom – target the customers most
likely to purchase (marketing)
• Entrepreneurship is the willingness to take certain risks in the pursuit
of goals
• Management is the ability to organize resources and administer tasks
to achieve objectives
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Three Types of Roles
• Interpersonal roles
– Figurehead, leader, liaison
• Informational roles
– Monitor, disseminator, spokesperson
• Decisional roles
– Entrepreneur, disturbance handler, resource
allocator, negotiator
Skills Managers Need
• Technical skills
– Knowledge and proficiency in a specific field
• Human skills
– The ability to work well with other people
• Conceptual skills
– The ability to think and conceptualize about
abstract and complex situations concerning the
organization
Skills Needed at Different Managerial Levels
Important Managerial Skills
The Importance of :
• Customers : the reason that organizations exist
– Managing customer relationships : responsibility of managers & employees.
– Consistent high quality customer service is essential for survival.
• Social media
– Forms of electronic communication through which users create online
communities to share ideas, information, personal messages, and other
content.
• Innovation.
– Doing things differently, exploring new territory, and taking risks.
– Managers should encourage employees to be aware of and act on
opportunities for innovation.
The Importance of Sustainability
• Sustainability -
a company’s ability to achieve its business
goals and increase long-term shareholder
value by integrating economic,
environmental, and social opportunities into
its business strategies.
Being a Manager :
• Challenges
– Can be a thankless job
– May entail clerical type duties
– Managers also spend significant amounts of time in meetings and dealing
with interruptions
– Managers often have to deal with a variety of personalities and have to make
do with limited resources
• Rewards
– Responsible for creating a productive work environment
– Recognition and status in your organization and in the community
– Attractive compensation in the form of salaries, bonuses, and stock options
STAKEHOLDERS LO 1-1
 WHAT is the
BUSINESS ENVIRONMENT?
External Environment (Business Organization)

Return
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Product and Revenues (of the Bus. Organization).

• Producer : produce line of products.

• Goods and Services.
• Related to the needs/wants and purchasing power of the Consumers
(Demand).

• Operations Management : transformation process, from inputs to

create outputs (Product).

• Product has Customer Value : Benefits – Costs.

• Product : has uniqueness (“ke-unik-an”), compare with competitors.
• Product : determines Competitive Advantage.

• Selling the product is revenue of the producer.

Producer (Firm “X”).
• Has various kinds of products.
• Has Concumers (needs and buy the products).
• Product has Customer Value (from Customer view).
• Customer Value = Benefits – Costs.
From Customer’s Need … to buy.

• If the Benefits is greater than the Cost, … the Customer buy.

Depend on the “Uniqueness of the Product”.
• Benefits : “usefulness”, utility, for the customers, when they buy.
• Costs : the “price” (the money spent) and other costs.
PT. “X”.
• Products : A, B, C …
• Producing the products : Operations Management (transformation
process from inputs to outputs).
• To make “the best Quality of the Products”.
• Costs of Operational Activities : recorded in Accounting Systems
(Cost Accounting).

• Involved Management Functions :

• Operations Management
• Human Resources Management
• Financial Management
• Marketing Management
• Others.
Business Organization (PT “X”).
• Benchmark : management systems with other companies.
• Potential technology (operations management, financial management,
etc).

• Competition, Competitive Advantage ?

• Market Structure (Perfect Competition, Monopoly, Oligopoly,
Monopolistic Competition).
• Related to Product Development, Product Quality and Market
(Consumer).
• STP, Marketing Mix (Bauran Pemasaran).
Service Marketing Mix – 7 P’s
• Product
• Price
• Place
• Promotion
• Process
• People
• Physical Evidence.

STP :
• Segmenting
• Targeting
• Positioning
Service Marketing
Mix :
Each element
should be
considered
in your financial
service marketing.
Product :
• State of the art – Technology.
• Can be from other countries that have deleloped.

PRODUCT MARKET (Consumers : buyers &

potential buyers)

TECHNOLOGY
Feedback : Market and Product
• Market (Consumers) : detect the needs/wants
Products and Marketing.
• If the product offered is already “well tested” and needed by the
customers, the the next process is related to Marketing.
• How big is the Customer Value of the product.
• STP Analysis (Segmenting, Targeting and Positioning).
• Marketing Mix (Bauran Pemasaran) :
Goods : 4 P, and, for Services : 7 P.
Product, Price, Place, Promotion, People, Process,
Physical Evidence.
• Marketing activities will be recorded in the Accounting Systems.
Will be analyzed.
Activities :
Management :
PT. “X” (Producer) : Operations
Human Resources, CONSUMERS.
Finance, Marketing, etc STP : Segmenting,
PRODUCTS Targeting
Positioning
A, B, C …

Customer Value : Strategic

Supplier. Benefits – Costs
Government (Regulations). Management.
Economy (Micro & Macro). Uniqueness of Products
Law,
Politics,
Competitive
Culture, etc Advantage.
Flow :
Advantages Key
Strategic
Management
Competitive Success
Factors

Fishbone Diagram
(Ishikawa)
PARETO
Diagram :
Cause - Effect
Finance :
Operations Costs
PRODUCTS Human
A, Resources,
B, Marketing, etc
C… Sell to Customer :
REVENUES

Cash Flow. Financial Statements :

(Sources and Uses of
Funds).
Balance Sheet,
Profit and Loss,
Cash-Flow.
Future Cash Flow :
Future Cash Outflow
Future Cash Inflow Account Profitability.