business environment lecture 1 rahat kazmi
TRANSCRIPT
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Course:BTECHNCBusiness/Similar/NewManagersModule:BusinessEnvironment
Lecture1– Introduction
Preparedby:RahatKazmi
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BusinessEnvironmentPartA• Organisationsandtheirobjectives• Responsibilitiesoforganisations• Consumerprotection• PeopleintheworkplacePartB• Resourceissuesandeconomicsystems• Marketdemand• Marketsupplyandprice• Productionandcosts• MarkettypesandmarketforcesPartC• InternationaltradeandtheEuropeandimension
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PartA:BusinessEnvironment-OrganisationsandtheirobjectivesToday’slectureon:-1. Thesizeandtypesoforganisations2. Thenatureofthepublicandprivatesectors3. Thenatureoftheprimary,secondaryand
tertiarysectors4. Businessmissionsandobjectives5. Stakeholderexpectations
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Thesizeandtypesoforganisations
• Whatisanorganisation?Keywordsplease...
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ABusinessOrganisation• Existstoprovidegoodsandservicesusuallyataprofit• Profitmaynotbethesoleaimofthebusinessorganisation
• U.K.– privatesector,growninrecentyearsduetostateowner=dcompaniesbecomingprivatised
• Businessorganisationscanrangeinsize,fromtheonemanbusinesstoplc’semployinglargenumbersofstaff
• ‘Asocialarrangementforthecontrolledperformanceofcollectivegoals’(Buchanan&Hucynski,2003)
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Thesizeandtypesoforganisations• “Anorganisationisanarrangementofpeoplepursuingcommongoals,achievingresultsandstandardsofperformance.”(BPP,2010,P.g.4)
• Asocial unit ofpeoplethatis structured andmanagedtomeeta need ortopursuecollective goals.Allorganizationshavea management structure thatdetermines relationships betweenthedifferent activities andthe members,andsubdividesand assigns roles, responsibilities,and authority tocarryoutdifferent tasks.Organizationsare open systems--theyaffectandareaffectedbytheir environment.
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Productsandservices
• AbusinessiscreatedtoPROVIDEeitherorbothofthefollowing...
• PRODUCTS – couldbemanufacturedandproducedbythecompany.Couldbepurchasedfrommanufacturersandsoldtotheenduser.Giveanexample...
• SERVICES – providesservicesthataresoldtotheenduserorcouldactasathirdpartymiddlemantosellservices.Examples?
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Characteristicsofabusiness
• Ownership - publicorprivate• Control – bytheowners;bythoseworkingonbehalfoftheowners;indirectlybygovernmentsponsors
• Activity– whattheydo• Profitandnon-profit orientation• Legalstatus– Ltd/Soletrader/Plc/partnerships• Size – staff,branches,sales,customersetc.• Sourcesoffinance– loans,funding,shareissuesetc.• Technology– usagelevels
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Characteristicsofabusiness
Whataffectsbusinessandhowtheyoperate?Keywordsplease...
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Theorganisation
newsweather
Stockmarket
Politicalforces
Demographicandculturalforces
Internationalforces
Customers
DistributorsGovernment
Unions
Suppliers
competitors
Environmentalforces
Economicforces
Technologicalforces
Thebusinessenvironment
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Legalformsofbusinessorganisations
• Limitedcompanies• Soletraders• Partnerships• Cooperatives
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ClassActivity
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Limitedcompanies
• Mustbeincorporatedwhenformed• Treatedasaseparateentity• Capableofowningproperty,employingpeople,makingcontracts,suingorbeingsued
• Continuityofsuccession• Ifthecompany/corporationfails,itsmembersareonlyliableforalimitedamountofthecompany’sdebtlimitedtothenominalvalueofitsshares(Parliament,1850’s)
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LimitedCompanies
• CompaniesAct,1985,amended• Intendedtominimiserisk…Towho?
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LimitedCompanies– Public&Private
• Twotypesoflimitedcompany:-1. PublicLimitedCompanies2. PrivateLimitedCompanies
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PublicLimitedCompanies
• MemorandumofAssociationANDArticlesofAssociationmustbefiledbeforeitcanbeIncorporated
• Muststatethatitsharesareavailabletobepurchasedbythepublic
• Musthaveatleast2membersandonedirector
• Mustobtainacertificateoftradingfromtheregistrarofcompanies
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PrivateLimitedCompanies
• MemorandumofAssociationANDArticlesofAssociationmustbefiledbeforeitcanbeIncorporated
• Maynotofferitssharestothepublic• Mayevenrestrictthetransferofsharesinternally• Nameofthecompanymustendwiththewords‘Limited’orLtd’
• Musthaveatleast2membersandonedirector• CanbegintradingstraightawayafterregisteredundertheCompaniesAct
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DisadvantagesofLimitedLiability
• Liability islimited– difficultforsmallercompaniestogetfundingorborrow
• Banksmaybeunabletorecoverfundsborrowedifbusinessfails
• Legalproceduresareextensivewhensettingupacompany
• ProceduresforpublishingvariousfinancialaccountsoftheCompanyareextensive
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CompanyDirectors
• ActasagentstotheCompany• Appointedbyshareholdersandmemberstoachievecompanygoals
• Dutytoacthonestly• DutytoactinthebestinterestoftheCompany• Dutytoavoidpossibleconflictsofinterest• ShouldnotmakeapersonalprofitfromtheDirectorshipotherthanthesalaryandfees
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SizeofthebusinessCanmean..• Numberofemployees• Volumeofoutput• Volumeofsales• Assets• Profitsearned• networth• SMEs• Nationalandmulti-national
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SoleTraders
• Simplestformofbusiness– onepersoninthebusiness,alone.
• Setuprequirementsandminimal• OWNERFULLYLIABLEFORANYDEBTSASTHEOWNERISTHEBUSINESS
• AllprofitsareliabletoincometaxratherthanCorporationTax
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SoleTrader- Advantages
1. Formalitiesforstartingupareminimal2. Completeautonomytorunthebusinessas
theindividualwishes3. Profitsbelongtothetrader4. Variousbusinessexpensesareallowable
againstincometax5. Nopublicdisclosureofaccounts
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SoleTrader- Disadvantages
• TraderisSOLELYresponsiblefordebtsofthebusiness
• Thetraderastheownersandmanagerofthebusinessisresponsibleforallaspectsofthebusiness(marketing,productdevelopment,sales,finance,etc.)
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Partnerships
• Apartnershipexistswhenmorethan2butlessthan20peopleagreetocarryoutabusinesstogether
• PartnershipAct,1890• Legalitiesareminimal• AdvisedtohaveaformalpartnershipsetupbyaSolicitor
• Membersofapartnershiparetheownersofallpropertyandareliableforitscontracts
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Partnerships
• Fullyresponsibleformeetingthedebtsofthecompany
• Partnersnotautomaticallyentitlestoasalary• Partnersareentitledtotheirpropershareoftheprofits
• Manyagreesalariedpartnerships• Somepartnershipconverttolimitedliabilitycompaniesduetoperceivedbenefits
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Partnerships– Advantages
• Fewformalitieswhensettinguppartnerships• Sharingofknowledgeandexperience• Sharingofthemanagementofthebusiness• Noobligationstopublishaccounts• Sharingofprofitsofthebusiness
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Partnership- Disadvantages
• Sharingoflossofthecompany• Eachpartnerliableforthedebtsofthepartnershipevenifitiscausedbytheotherpartners
• Riskthatpartnersmaynotbeabletoworktogetherpersonally
• Deathwillautomaticallydissolveapartnership• Bankruptcywillautomaticallydissolvethepartnership
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CooperativeEnterprises
• Smallgroupsofpeoplewhowanttosetupabusinessalongexplicitlydemocraticlinesandwiththebenefitoflimitedliability
• FeaturedinBritishbusinessforover100years• Profitsofthebusinessgivenbacktothecustomer/consumerindividendsbasedontheamountofpurchasesoveraperiodoftime
• Individualscanbenefitnotonlyainvestors,butalsoasemployeese.g.JohnLewis
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CooperativeEnterprises
• EncouragedbyU.K.governmentandbytheCooperativeDevelopmentAgencyestablishedin1978
• LEGISLATION– Industrial&ProvidentSocietiesAct,1965
• TheactstatedthatinsteadofMemorandumsandArticlesofAssociation,cooperativesshallhaveasetofrulesapprovedbytheRegistrarofFriendlySocieties
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Industrial&ProvidentSocietiesAct(1965)– RulesandPrinciples• Eachmembermusthaveequalcontrolonthe‘oneperson,onevote’principle
• Membersmustbenefitprimarilyfromtheirparticipationinthebusiness
• Interestonloansorsharecapitalistobelimited• Surplus/profitistobesharedbetweenmembersnproportiontotheircontributionstothecooperative
• Surplus/profitcanberetainedbythecompany• Membershipmustbeopentoallwhoqualify
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Industrial&ProvidentSocietiesAct,(1965)– RulesandPrinciples
• Theprincipleoflimitedliabilityappliedtoallmembersofthecooperative
• Thecooperativemustberegistered• Toberegistered,thecooperativemusthaveaminimumof7members
• Namesomecooperatives…
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Cooperatives- Advantages
• Theopportunityforgenuinepoolingofthecapitalbetweenagroupofpeople
• Encouragesactivecollaborationbetweenall• Enablesdecisionstobemadedemocratically• Providesrewardsonanequitablebasis• Ifregistered,provideslimitedliability
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Cooperatives- Disadvantages
• Lesslikelihoodofalevelofprofitabilityandgrowth
• Relationshipscandeteriorate,especiallywhensomeareseentobemakingsmallercontributions
• Democraticdecisionmakingcantakealotoftimebeforeactionistaken
• Membersnottrulydedicatedcancauseproblems
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Largeorganisations
Advantages?Explain...• Resources• Greaterdivisionofwork(Fayol/Taylor)• Careerprospects• Experts• Economiesofscale• Continuityofgoodsandservices
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Largeorganisations
Disadvantages?Explain...• Hierarchy• Diversified• Lotsofmaintenanceneeded• Coordinationproblems• Policycontrolissues• Tasksnotmotivating
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Internaleconomiesofscale
1. Specializationoflabour(Taylor)2. Divisionoflabour3. Specializedmachinery4. Dimensionaleconomies– volumeoutputv
sizeofequipmentneededtoprocesstheoutput
5. Buyingeconomies6. Stockholdings
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Advantagesofasmallbusiness
a) Competitiveb) Risktakersc) Betterinternalrelationshipsd) Specialistse) Localmarketsf) Expertconsultantsg) Suppliers/sub-contractorstolargerfirmsh) Largescaleproduction/servicingnotrequired
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Whytheeconomyhaschangedrecently
• De-industrialisation• Tradedeficit– importsgreaterthatexports• Shiftinoutputbetweensectors– northseaoilandgas
• AgricultureintheUKissmall– madcowdisease/footandmouth
• Declineinthesecondarysector,riseinthetertiarysectorcauseddecline
• Demandsshiftfromgoodstoservices• Declineinmanufacturing
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Consequencesofchange• Risingexchangerate– expensivetoexport,importingis
cheaper• Failedbusinesses• Diminishedmanufacturingindustry• Worldmarketconditions• Ethicaltradingissues• Overseascompetition• Technologicalprocess• Sunriseindustries– technicalcompanies• ReductionofSunsetindustries– steelworkers,shipbuilding
etc.• Unemployment/reducedconsumerspendingpowers
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• ‘describes theorganizations basicfunction insociety,intermsoftheproductsandservices itproducesforitscitizens’.{Mintzberg}.
• missionstatements:whatarethey?(formalstatementsofanorganisation’smission).
• itshouldbebrief,flexibletoaccommodatechangeanddistinctive.
2.0}MISSION.
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Øpurpose.Østrategy.Øpoliciesandstandardsofbehaviour.Øvalues.
Elementsofamission.
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• Mission(Re-cap):- “describes theorganisation’s basicfunctioninsociety,intermoftheproductsandservicesitproducesforitsclients”.{Mintzberg}.
• Elementsofmission:-• Purpose:-Whydoesthecompanyexist?Isittodowithshareholders?Otherstakeholders?Highergoals?
Mission
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q corporategovernance.q stakeholders.q businessethics.q culturalcontext.
Influencestomissionstatements.
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ØBeingusedmerelyforPRØUsedtomakesenseofsomethingthathasalreadybeendonebyanorganization
ØIgnoringmissioninpursuitoforganization’sactivities.
ØToomuchof‘buzzwords’e.g.‘Tobethegreatest-------’
Whatmightgowrongwithamission?
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ClassActivity2
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• Values:- 1}The‘culturalgluethatenablestheorganisationtofunctionasaunity’.2}Valuescanincludeprinciplesofbusiness.
• - commitmenttosuppliersandstaff.• - Socialpolicye.g.onnon-discriminationorecology.• - Commitmenttocustomers.• 3}Loyaltyandcommitment,toemployees.• 4}Guidanceforbehaviour;- asenseofcommonpurpose
Values
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- Discussthedifferencebetweenavisionandamission.Giveanexampleforeachfromanorganization(s)ofyourchoice.ExamplesofeffectiveVision statementsinclude:Alzheimer'sAssociation:"OurVision isaworldwithout Alzheimer'sdisease.“
Microsoft:"Empowerpeoplethroughgreatsoftwareanytime,anyplace,andonanydevice.“
AMission statement:Definesthepresentstateorpurpose ofanorganization;Answersthreequestions aboutwhyanorganizationexists-WHATitdoes;WHOitdoes itfor;andHOWitdoeswhatitdoes.ExamplesofeffectiveMissionstatementsinclude:Nissan:"Nissanprovidesuniqueandinnovativeautomotiveproductsandservicesthatdeliversuperior,measurablevaluestoallstakeholdersinalliancewithRenault."
Activity
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§ mission:- agoodoneshouldnormallybeabouthereandnow,visionoftenisn’t.
§ vision:- usuallyvaguehencemayfailtoinspireandmotivatestaff.
§ onceavisionhasbeenachieved,whathappensnext?Itmayceasetohaveanyvalueunlessre-invented.
Discussthedifferencebetweenvisionandmission;guide.
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vprofitabilityvgrowthvcashflowvr.o.c.e.vriskvqualityvaddedvaluevrevenue
corporateobjectives
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• Mintzberg(1997)hasdefinedgoalsasbeing‘theintentionsbehinddecisionsoractions,thestatesofmindthatdriveindividualsorcollectivesofindividualscalledorganizationstodowhattheydo’
• Goalscaneitherbeoperationalornon-operationalExampleofoperationalgoal:anorganizationsellingIPad4mayhaveagoal‘toincreasemarketshareinWestLondonby3%’(operationalgoalexpressedasanobjectiveandthereforemeasurable).
Exampleofnon-operationalgoal:areligiousorganizationmayhaveagoalto‘helppeopleknowthetruth’(non-quantifiable)
Whatisagoal?
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• AnobviousobjectiveonyourcurrentcareerpathistoachieveyourBTECFirst.Precise,measurabletargetswillhelpyoudothis.Youwillhavetoconcentrateondoingyourbestasyouachieveoneunitatatime.YoushouldsetthesegoalsusingSMARTobjectives.
•Specific – youneedaclearstatementaboutwhatyouwilldo.Usually,itisquantified,whichmeansithasanumberinit.For• example:‘CompleteBEAssignmentin8weeks.’
SMARTObjectives:
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SMARTObjectives:
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ClassActivity
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• BppLearningMedia(2010)BusinessEssentials;SupportingHND/HNCandFoundationDegrees,BusinessEnvironment,2nd edition,Chap.1,pp.4-41
• BppLearningmedia (2010)CIMProfessionalCertificateinMarketingStudyText;AssessingTheMarketingEnvironment2nd edition,TheContextofOrganizations,Chap.1,pp.2-20
• BuchannanandHuczynski,A. (2003)OrganizationBehaviour;AnIntroductory text,4th Edition,Chap.1,pp.10-45
• Gilligan,C.andWilson,R.M.S(2009)StrategicMarketingPlanning2nd edition;wheredowewanttobe?Strategicdirectionandstrategyformulation.Chap.8,pp.297-336
• Hamel,G.andPrahalad,C.K.(1994)Competing fortheFuture:BreakthroughStrategiesforSeizingControlofYourIndustryandCreatingtheMarketsofTomorrow.Boston,MA:HarvardBusinessSchoolPress
• Johnson, G.andScholes,K.A.(2002)ExploringCorporateStrategy,2nd editionpp.239
• Mintzberg, H.(1987)CraftingStrategy,HarvardBusinessReview,65(4),pp.66-75• Mintzberg, H.(1994)TheRiseandFallofStrategicPlanning.HemelHempstead:
Prentice-HallInternational
References
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NextLecture
• Knowhowtoidentifyinternal,connectedandexternalorganization
• stakeholders.• Beabletoidentifyandmapdifferentandoftenconflicting
• Stakeholderinterestsandinfluencetotheorganization.
• Beabletoexplainstakeholderpower-influencematrix
• Beabletodiscuss responsibilitiesoforganisations
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