Principles of Management - ??Principles of Management ... and how does supply and demand work? ... The money a business earns when revenues are greater than

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  • Student name/ ID

    Principles of Management A case-led introduction to the environment,

    functional areas and interactions involved

    in everyday business.

    Professor Karin McDonald

    Office: Room L513

  • BED01 Professor K.McDonald


  • BED01 Professor K.McDonald


    Table of Contents

    Introduction i

    Unit 1: Business Basics I 1

    Unit 2: Business Basics II 11

    Unit 3: The Operations Department 23

    Unit 4: The Marketing Department 35

    Unit 5: Supply Chain and Channel Management, Category Management, etc. 46

    Unit 6: Reaching Global Markets 56

    Unit 7: Corporate Organization and Planning 68

    Unit 8: The Finance Department 80

    Unit 9: The Accounting Team and Financial Statements 94

    Unit 10: The Human Resources Department 112

  • i


    Welcome to POPCO

    For the purpose of this class, you should now consider yourself an intern at the

    fictional manufacturing company, POPCO. POPCO is a Korean-based toy company

    that started in the 1980s. They make a variety of toys and traditional Korean

    games. Their main products are soft toys (in English language, stuffed animals).

    They have recently launched a product called Clucky Chicken. Clucky Chicken is

    an artificially intelligent chicken soft toy. It relies on basic computer

    programming via a computer chip inside the stuffed toy to interact with

    consumers. POPCO launched the Clucky Chicken toy to compete with the wildly

    successful Zhu Zhu Pets line of toy hamsters.

    Class discussion and exercises will focus on POPCO to describe theories and

    principles. Your job as an intern is to participate in helping the company make

    good decisions, considering the new theories and principles you have learned.

    Later, you will spend a week or two learning about the way each different area of

    POPCOs business works, including the types of jobs in each department, and

    their responsibilities and activities. We will discuss in class how these jobs,

    responsibilities and activities might be different in different kinds of companies.



    The purpose of worksheets is to help you check your understanding of the

    concepts and skills in the reading, so that in class we can demonstrate and

    practice applying that learning. Worksheet problems and questions are very

    similar to those on the quizzes, although the quiz problems and questions are a

    little bit harder.

    Ethical questions

    Included in this CP are questions that raise ethical issues. Ethics are a key

    consideration of the global business environment and interactions within and

    without a business. Ethics are more than just corporate social responsibility,

    though. We will discuss ethical issues in business throughout the course as time

    allows. Ethics-related questions are marked by a Dongguk lotus emblem:


    Like any field of study, business has its own jargon, and requires learning a lot of

    vocabulary. To avoid confusion where the business meaning of a common English

    term may be different from the definition you know, or where common usage of

    a business term may lead to confusion, this CP includes common terminology

    explanations marked with a speech bubble:

  • 1

    Unit 1

    Business Basics I

    Learning objectives of this unit

    In this unit you will learn the following concepts:

    What is the goal of a business? What are the resources it uses? (in class: resource diagram)

    What is profit, and who receives it? (in class: profit calculation)

    What is a competitive market, and how does supply and demand work? (in class: graphing supply and demand)

    How do businesses interact with households and governments (in class: circular flow diagram)

    with regards to resources?

    What trends are common to competitive market economies? (in class: productivity calculation)

    What are economies of scale, and how can a company get them? (in class: economies of scale diagram)

  • 2

    Unit 1 Vocabulary

    Factors of production (): Things of economic value needed to produce

    goods and services

    Net Profit (): The money a business earns when revenues are greater than


    Revenues (): The money a business earns from activities like selling goods or


    Expenses (): The economic costs that a business incurs through its

    operations in order to earn revenues


    Supply and demand ( ): Supply is how much quantity that sellers in

    the market can offer of a specific good or service at each of various prices, and

    demand is how much quantity of a good or service buyers are willing to buy at

    each of various prices in that market.

    : , / :


    Households (, , ): The population of an economy that consumes

    goods and services and also own and contribute other factors of production


    Stockholder (): A person who owns stock in a corporation

    Stakeholder (): The different people who are affected by an

    organizations activities and decisions

    Productivity (): The amount of output produced by a given amount of

    factors of production input; often measured in quantity per unit of time.

    Economies of Scale ( ): The cost advantage that arises with increased

    output of a product. For many (but not all) firms the greater the quantity of a

    good produced, the lower the per-unit fixed cost because these costs are shared

    over a larger number of goods.

    Specialization (): A method of production where a business or area focuses

    on the production of a limited scope of products or services in order to gain

    greater degrees of productive efficiency.

    Growth (Globalization) ( ()): The tendency of investment funds and

    businesses to move beyond domestic and national markets to other markets

    around the globe, thereby increasing the interconnectedness of different markets.

  • 3

    What makes a Business

    There are many ways to define business. One way is to combine the purpose of

    business in a definition with the resources required by business activities, and the

    goal of those activities. Below is a common definition of business.

    Business is an organized effort to combine and manage resources in a

    profitable way in order to produce products and services that satisfy the

    needs of customers.

    Purpose: The definition of the purpose of business has changed over the years

    with changes in economic and business thought. However, most people today

    define the purpose of business as satisfying the needs of customers by producing

    and selling products (also called goods) and services.

    Resources: No matter what type of country or political system you are working in,

    business activity requires the organization and management of resources.

    Generally, you can categorize resources as material, human, financial, or

    information resources.

    What are the specific resources a toy company requires to produce and sell toys?

    In economics class, you probably learned to remember the categories of land,

    labor, and capital resources, also called factors of production since they are

    required to produce goods and services. Sometimes these are referred to as

    factor inputs.

    Historically, different theorists have emphasized different factors of production

    when considering what makes a strong national economy. With increasing study

    into the factors of production and political economy, academics today also

    include the categories knowledge / information and entrepreneurship as

    important factors of production.

    More and more, technology is also an important factor of production. People still

    measure the economic strength of a country according to the factors of

    production it has and how the countrys political system manages those resources

    to meet the needs of its own customers: society.

    Goal: Most people consider that the goal of business is to make a profit. But

    many businesses do not always make a profit every year. And some businesses

    are started to make a profit for some owners this year, but do not have the

    resources or management to be successful long-term, creating losses for often

    different owners in future years.

    The general term profit simply means that, in a given time period, a businesss

    sales revenues are greater than its expenses. Sales revenues minus expenses

    equals profit.

    How would you calculate profit for your own activities?

    People often use the general term revenues instead of sales revenues.

    There are many words and phrases that mean the same as profit: earnings,

    income, and the bottom line all mean profit (specifically net profit). But be

    aware the terms operating profit and gross profit represent different amounts.

    We will learn more about these terms in the accounting unit.

    Who gets the profit? Profit is often invested back into the business. It can also be

    distributed to owners of the business. Most people think of business owners as

    those who manage the business day-to-day. But this is not typically the case. Any

    person or