ch01 gabungan

Copyright © 2004 South-Western. All rights reserved. 1–1

Organization of a BusinessOrganization of a Business


Key Business DecisionsKey Business Decisions•Product

– What type of product should be produced?•Production

– How should the product be produced?•Promotion

– How should the product be promoted?•Financing

– How should the company obtain funds to finance the cost of producing the product?


Business DecisionsBusiness Decisions


Key StakeholdersKey Stakeholders• Owners

– Entrepreneurs– Co-owners– Stockholders

• Creditors• Employees

– Managers• Suppliers• Customers


Interaction among Owners, Interaction among Owners, Employees, Customers, Suppliers, Employees, Customers, Suppliers,

and Creditorsand Creditors

Exhibit 1.1


Creating a Business IdeaCreating a Business Idea• Identify a competitive advantage.•Differentiate the product or service from competitors.

•Determine necessary resources.•Assess feasibility of the idea.


Success StoriesSuccess Stories• Domino’s Pizza

– Managhans bought bankrupt pizza parlor– Started with little funding– Now generates sales of $1 billion per year

• Jeremy’s Micro Batch Ice Cream– Applied microbrewery concept to ice cream– Makes ice cream in small batches, sold in limited

editions• Glow Dog, Inc.

– Sells light-reflective clothing for pets– After two years, average annual sales of $1 million


Lessons to RememberLessons to Remember•Successful businesses do not require a great invention. – Many focus on making life more convenient

for customers.•Some business ideas will fail—but entrepreneurs can learn from failures and make revisions.


Key Functions of BusinessKey Functions of Business• Management

– Means by which employees and other resources are used by the firm

• Marketing– Means by which products and services are

developed, priced, distributed, and promoted to customers

• Finance– Means by which firms obtain and use funds for their

business operations


Key Functions of BusinessKey Functions of Business•Accounting

– Summary and analysis of the firm’s financial condition

– Used to make various business decisions• Information systems

– Information technology, people, and procedures that provide appropriate information to make effective decisions


How Business Decisions How Business Decisions Affect a Firm’s EarningsAffect a Firm’s Earnings

Exhibit 1.4


Common Business Common Business DecisionsDecisions

•Management Decisions– What equipment is needed?

– How many employees should be hired?

– How can employees be motivated to perform well?



•Marketing Decisions– What price should be charged?

– Should the product be changed to be more appealing to customers?

– Should the firm use advertising or some other strategy to promote its product?



•Finance Decisions– Should financial support come from the sale

of stock or from borrowing money or some combination?

– Should the firm attempt to obtain borrowed funds for a short-term or long-term period?

– Should the firm invest funds in a new business project?


A Business PlanA Business Plan•Detailed description of the proposed business– Description of the product or service– Types of customers the business would

attract– Competition– Facilities needed for production


Developing a Business Developing a Business PlanPlan

•Assess the Business Environment– Economic environment– Industry environment– Global environment

•Develop Management Plan– Organizational Structure– Production– Human Resources


Developing a Business Developing a Business PlanPlan

• Marketing Plan– Target Market– Product Characteristics– Pricing– Distribution– Promotion

• Financial Plan– Financing– Feasibility


Matrix Structures: Matrix Structures: Advantages and Advantages and DisadvantagesDisadvantagesChief Executive

Officer or PresidentCorporate

Staff

Manager Administration

and Human Resources

Manager Projects

Manager Manufacturing

Manager Engineering

Manager Marketing

Manager Public Relations

Project A

Project B

Project C

Project D

Exhibit 10.4

TRANSPARENCY-88


How the Internet Influences How the Internet Influences Industry StructureIndustry Structure

Source: Adapted from: Porter, M.E. 2001. Strategy and the Internet. Harvard Business Review, March: 63-78.

(+) By making an overall industry more efficient, the Internet can expand sales in that industry.

(-) Internet-based capabilities create new substitution threats.

Threat of substitutes

(+/-) Procurement using the Internet may raise bargaining power over suppliers, but it can also give suppliers access to more customers.

(-) The Internet provides a channel for suppliers to reach end users, reducing the power of intermediaries.

(-) Internet procurement and digital markets tend to reduce differentiating features.

(-) Reduced barriers to entry and the proliferation of competitors downstream shifts power to suppliers.

(-) More price-based competition intensifies rivalry.

(-) Widens the geographic market, increasing the number of competitors.

(+) Eliminates powerful channels or improves bargaining power over traditional channels.

(-) Shifts bargaining power to consumers.

(-) Reduces switching costs.

Threat of new entrants

(-) Reduces barriers to entry such as need for a sales force, access to channels, and physical assets.

(-) Internet applications are difficult to keep proprietary from new entrants.

(-) A flood of new entrants has come into many industries.

Bargaining power of suppliers

Rivalry among existing competitors

Buyers

Bargaining power of end users

Bargaining power of channels

(-) Technology-based efficiencies can be captured, lowering the impact of scale economies.(-) Differences among competitors are difficult to detect and to keep proprietary.

Exhibit 8.5

TRANSPARENCY-74


Entry Modes for Entry Modes for International ExpansionInternational Expansion

Low

Degree of Ownership and Control

High

Low High

Ext

ent o

f Inv

estm

ent a

nd R

isk

Exporting

Licensing

Franchising

Strategic Alliance

Joint Venture

Wholly Owned Subsidiary

Exhibit 7.7TRANSPARENCY-67


Three Generic Strategies

COMPETITIVE ADVANTAGE

OverallCost LeadershipDifferentiation

Uniqueness PerceivedBy the Customer Low Cost Position

Industrywide

ParticularSegment Only Focus

STR

ATE

GI C

TA

RG

ET

Source: Adapted from Porter, M.E. 1980. Competitive Strategy, New York: Free Press, page 39.



Human Capital: Three Human Capital: Three Interdependent Interdependent ActivitiesActivities

Attracting

Human

Capital

Developing

Human

Capital

Retaining

Human

Capital



The Resource Based View of the Firm: Resources and CapabilitiesFinancial • Firm’s cash account and cash

equivalents• Firm’s capacity to raise equity• Firm’s borrowing capacity

Physical • Modern plant and facilities• Favorable manufacturing locations• State-of-the-art machinery and

equipment

Technological

• Trade secrets• Innovative production processes• Patents, copyrights, trademarks

Organizational

• Effective strategic planning processes• Excellent evaluation and control

systems

Tangible Resources

Source: Adapted from J.B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R.M. Grant, 1991, Contemporary Strategy Analysis (Cambridge, U.K.: Blackwell Business), 100-102. Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. 2001. Strategic Management: Competitivenesss and Globalization. Fourth Edition. South-Western College Publishing: Cincinnati, Ohio.

Exhibit 3.4

Human • Experience and capabilities of employees• Trust• Managerial skills• Firm-specific practices and procedures

Innovation and creativity

• Technical and scientific skills• Innovation capacities

Reputation • Brand name• Reputation with customers for quality and reliability• Reputation with suppliers for fairness, non-zero sum

relationships

Intangible Resources

Organization Capabilities• Firm competences or skills the firm

employs to transfer inputs to outputs

• Capacity to combine tangible and intangible resources, using organizational processes to attain desired end

• Outstanding customer service

• Excellent product development capabilities

• Innovativeness of products and services

• Ability to hire, motivate, and retain human capital

Examples:

TRANSPARENCY-24


The Value Chain: Primary and Support Activities

The Value Chain

General administrationHuman resource management

Technology development

Procurement

Inboundlogistics

Operations Outboundlogistics

Marketing and sales

Service

Margin

Mar

gin

Supp

ort A

ctiv

ities

Primary Activities

Source: Adapted with the permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter. Copyright © 1998 by Michael E. Porter.



Marketing Decisions and Firm Marketing Decisions and Firm ValueValue

• Product strategies– Target appropriate market– Differentiate products from competitors

• Pricing strategies– Proper pricing can increase future cash flow

• Distribution strategies– Influence the number of customers reached by firm’s

products• Promotion strategies

– Increase acceptance of products through special deals, advertising, and publicity


Management Decisions and Management Decisions and Firm ValueFirm Value

• Motivating employees– Increase employee satisfaction– Align compensation with performance– Provide job security– Provide flexible work schedule– Utilize employee involvement programs

• Managing employees– Proper recruiting and screening of new hires– Develop employees’ skills– Establish proper performance evaluation procedures


Management Decisions and Management Decisions and Firm ValueFirm Value

• Strategic planning– Capitalize on opportunities that increase revenue or

reduce production costs• Organizational structure

– Try to attain low level of operating expenses• Production process

– Plant site location to minimize costs– Design and layout to reduce costs– Quality to improve customer satisfaction and firm’s

reputation– Use technology to improve efficiency


Valuation of a BusinessValuation of a Business•Firm’s value is equal to the present value of its future cash flows– Cash inflows come from sales– Cash outflows result from payment of

expenses or taxes– Firm’s value is highly influenced by its

expected future earnings


Exposure to Firm-Specific Exposure to Firm-Specific CharacteristicsCharacteristics

Exhibit 19.4


Summary of Capital Budgeting Summary of Capital Budgeting TasksTasks

Exhibit 17.2


Summary of Firm’s Debt and Summary of Firm’s Debt and Equity Financing MethodsEquity Financing Methods

Exhibit 16.4


Chapter SummaryChapter Summary• Firm’s financial condition is important to financial managers, creditors and stockholders.

• Income statement and balance sheet are the most important financial statements used to evaluate a firm’s financial condition.

• Financial ratios help evaluate a firm’s liquidity, efficiency, profitability, and financial leverage.


Example of Income Example of Income Statement: Taylor, Inc.Statement: Taylor, Inc.

Exhibit 15.1


Income StatementIncome Statement•Net sales•Cost of goods sold•Gross profit•Operating expenses•Earnings before interest and taxes•Earnings before taxes•Net income (earnings after taxes)


Amount of Promotion Used Amount of Promotion Used throughout throughout

the Product’s Life Cyclethe Product’s Life Cycle

Exhibit 14.9


Summary of Methods That Make Summary of Methods That Make Up the Promotion MixUp the Promotion Mix

Exhibit 14.7


Chapter SummaryChapter Summary• Demographic trends, geography, economic factors, and changes in social value impact size of target market

• Creation of new products involves a number of steps from developing the idea to a post-audit

• Companies use unique product design, packaging, and branding to differentiate

• Cost of production, inventory supply, and competitors’ prices influence pricing decisions


Product Life CycleProduct Life Cycle•Typical phases over the lifetime of products– Introduction - create awareness of product– Growth - reinforce product features– Maturity - competition increases– Decline - reduced demand

•Marketing decisions may be influenced by the stage in the product life cycle


Methods Used to Methods Used to Differentiate ProductsDifferentiate Products

Exhibit 12.4

Method Achieve Superiority by:

Unique design Higher level of product safety, reliability, or ease of use.

Unique packaging Packaging to get consumers’ attention or to improve convenience.

Unique branding Using the firm’s image to gain credibility, or using a unique brand name to imply prestige.


Methods Used to Enhance Job Methods Used to Enhance Job SatisfactionSatisfaction

Exhibit 10.9


Methods Used to Enhance Job Methods Used to Enhance Job SatisfactionSatisfaction

Exhibit 10.9


Hawthorne StudiesHawthorne Studies• In 1920s, researchers studied workers in a Western Electric plant:– Attempted to identify how working conditions

affected workers’ level of productivity. Increases in lighting and decreases in

lighting both improved productivity Shorter breaks and longer breaks both

increased productivity– Concluded that any changes in conditions that

reflect increased attention toward employees increased productivity.


Theories on MotivationTheories on Motivation•Motivation of employees is influenced by job satisfaction–the degree to which employees are satisfied with their jobs– Employees who are satisfied with their jobs

are more motivated.– Managers can motivate employees by

ensuring job satisfaction.


Structure and Employee Structure and Employee InputInput

• Intrapreneurship Structure can be adjusted to obtain greater

employee input– Encouraging employees to offer ideas for

changes that enhance the firm’s value.– Assigning employees to act as if they were

entrepreneurs running their own companies.

• Informal Structure Allows employees to substitute for each other to

complete tasks on time. Reduces amount of manager involvement.


Line and Staff Line and Staff OrganizationOrganization

Exhibit 8.5b


Line OrganizationLine Organization

Exhibit 8.5a


Managerial SkillsManagerial Skills• Conceptual skills

– Understanding the relationships among various tasks of the firm

• Interpersonal skills– Skills necessary to

communicate with customers and employees

• Technical skills– Skills used to perform

specific day-to-day tasks

• Decision-making skills– Skills for using

existing information to determine how the firm’s resources should be allocated


ControllingControlling•Evaluating tasks by measuring performance and comparing it to standards and expectations– Determine if plans have been achieved

Allows for continual evaluation of plans Some standards are firm-wide, other standards are

department specific– Detects deficiencies and take corrective

action which may require a change in the standards.


Leading (cont’d)Leading (cont’d)•The process of influencing the habits of others to achieve a common goal by:– Motivating employees

Delegating responsibility Encouraging employee feedback

– Leading must be consistent with strategic plan.

– Demonstrating initiative by a willingness to take action.


LeadingLeading•Process of influencing the habits of others to achieve a common goal by:– Communicating job assignments and

methods of completing tasks to employees.– Serving as a role model for employees.– Providing incentives to complete jobs

correctly.


OrganizingOrganizing•Proceeds once the firm’s goals are established (planning)– Resources are obtained and organized to

achieve those goals.– The organizing function occurs continuously

throughout life of firm.– Organizing expertise is especially important

when firms restructure frequently.– Creation of new jobs and positions may

require revision of job assignments.


PlanningPlanning• Strategic plan

– Identifies long-term business focus, mission statement is a key component

• Tactical plans– Smaller-scale plans

(1-2 years) that are consistent with the long-term plan

• Operational plans– Establishes methods

for use in the near future to achieve tactical plans

– Follow organization’s policies and procedures

• Contingency plans– Alternative plans

developed for possible business conditions


How Various Business Functions How Various Business Functions Are Used to Achieve the Are Used to Achieve the

Strategic PlanStrategic Plan


Managing EffectivelyManaging Effectively


Develop Competitive Develop Competitive AdvantageAdvantage

•Ways to maintain or increase market share:– Low-cost production

Set a lower price to gain market share.– Better quality than competitors

Create higher quality without incurring excessive costs.

– Product differentiation Satisfy customer needs in ways that are different

than competitors.


Chapter SummaryChapter Summary•Firm performance depends on three macroeconomic factors: economic growth, inflation, and interest rates.

•Demand and supply conditions determine market prices.

•Federal government uses monetary and fiscal policies to influence macroeconomic conditions.


Possible Expenses Incurred Possible Expenses Incurred as a Result of Social as a Result of Social

ResponsibilitiesResponsibilities

Exhibit 3.10


SummarySummary•Business ethics influence decisions•Firms have basic responsibilities

– Provide safe working conditions– Treat work workers properly– Provide equal opportunity for employees– Make decisions in best interest of

stockholders– Maintain a clean environment


SummarySummary• Entrepreneurs can select a form of ownership:

– Sole proprietorship– Partnership– Corporation

• Return and risk depend on form of business ownership.

• Common methods for obtaining ownership of existing businesses:– Family business– Purchase existing business– Franchising


Types of FranchisesTypes of Franchises• Distributorship

– Dealer is allowed to sell a product produced by a manufacturer.

• Chain-Style Business– Firm is allowed to use the trade name of a

company and follows guidelines related to the pricing and sale of the product.

• Manufacturing Arrangement– Firm is allowed to manufacture a product

using the formula provided by the franchisor.


FranchisingFranchising•Business owner (franchisor) allows another (the franchisee) to use its trademark, trade name, or copyright, under specified conditions.

•Each franchise operates as an independent business.

•Typically owned by a sole proprietor.


Impact of Forms of Impact of Forms of OwnershipOwnership

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