Business Administration and Digital Economics

• The text explores business administration and digital economics.
• The first session is on business administration.
• The course is taught by Assoc.-Prof. Dr. Christoph Feichter at the Institute for Corporate Management, Department Strategy & Innovation, in Vienna on March 10, 2025.

Course Details

• BWDI - Summer Semester 2025
• Course code: LV 5718.
• The professor is Feichter and Kragulij

Attendance Units (Präsenzeinheiten)

• March 10, 2025, 08:00-16:00 in TC.0.10 Audimax
• March 12, 2025, 11:00-14:00 in TC.0.10 Audimax
• March 17, 2025, 11:00-14:00 in TC.0.10 Audimax
• March 19, 2025, 11:00-14:00 in TC.0.10 Audimax

Online Q&A Session

• April 28, 2025, 12:00-15:00
• This is an Online-Einheit and will be done by Feichter

Revision Sessions (Repetitorien) for exam preparation

• Separate registration is required
• The second week of the exam takes place between April 28 and May 3, 2025, LV 6508 will also take place on April 23, 2025
• The third week of exams takes place between June 23-28, 2025, LV 6511/6512 will also take place on June 18, 2025

Today's Program

• 8:15-9:30 Lecture by Feichter
• 9:30-9:45 Pause
• 9:45-10:45 Feichter giving a Lecture
• 10:45-11:00 Pause
• 11:00-12:00 Feichter giving a Lecture
• 12:00-13:00 Lunch break
• 13:00-16:00 Lecture by Kragulij

Intro To Business Administration

• Business administration (BWL) assumes goods and services are fundamentally scarce, requiring economic management.
• While economics is abstract, BWL focuses on individual businesses, with goals including description, analysis, explanation, and decision-making support.
• BWL studies businesses as economic entities and decision-making units, considering their functions and processes.

Three Perspectives of Business Administration

• Decision-Oriented BWL
• Managing scarcity through decision-making.
• Recognizing trade-offs and making informed decisions.
• Behavior-Oriented BWL
• Balancing stakeholder interests.
• Incorporates Bounded Rationality, Satisficing Behavior, and Incentive-Contribution Theory.
• Innovation-Oriented BWL
• Implementing new value creation opportunities for stakeholders.
• Overcoming scarcity and trade-offs through creativity.
• Aims for sustainable win-win situations via innovation.

Decision-Oriented BWL

• Economic activity as decision-making under scarcity.
• Scarcity necessitates choices about resource allocation.
• Trade-offs are the balancing of competing goals.
• Opportunity cost refers to the benefit forgone when choosing one option over another.
• Example 1: Choosing between a vacation or saving for a home.
• Scarcity: Money
• Tradeoff: Immediate enjoyment vs. future financial security
• Opportunity cost: Lost vacation or delayed homeownership
• Example 2: Working in a bar for €50 or going to the gym.
• Scarcity: Time
• Tradeoff: Earning money vs. personal well-being and appearance
• Opportunity cost: The forgone income or the lost opportunity to improve fitness
• Focuses on production decisions:
• How a restaurant can create appealing dishes from limited ingredients.
• Which market or target group a company should serve.
• What compensation should be offered to employees.
• Aims to explain how individual and organizational goals arise, interact, and guide decisions when resources are limited.
• BWL aims to describe decision-making behavior, highlight trade-offs, and improve understanding of production decisions (explanatory function).
• BWL offers practical methods to improve decision-making (design function).
• Practical Examples
• Cost accounting, investment decisions, marketing, personnel decisions, and employee compensation methods.

Behavior-Oriented BWL

• Herbert A. Simon (Nobel laureate) noted that people make decisions with bounded rationality and seek satisfactory solutions rather than optimal ones.
• Behavioral Theory of the Firm (Richard M. Cyert and James G. March): Stakeholders in companies try to enforce their interests, akin to politics
• Incentive-Contribution Theory
• (Chester Barnard): What stakeholders offer to a firm must correspond to what they receive, otherwise, the firm cannot sustainably operate.

Innovation-Oriented BWL

• Focuses on implementing new value creation opportunities for stakeholders
• Companies are creating new ways to combat scarcity/tradeoffs
• Win-Win situations are achieved through entrepreneurial creativity
• Implementation of ideas = Innovation
• Producer and Consumer Surplus Example
• iPhone X production costs: €350, retail price: €1,000 Apple earns €650 for each iPhone sold (producer surplus) Consumers would pay €1,500, but pay €1,000, thus saving €500 with their purchase (consumer surplus).
• Innovation creates win-win situations; a concept not seen before

Henry Ford (1863-1947) — Examples of Successful Entrepreneurship

• Vision: Produce reliable, affordable cars for the masses.
• Ford was not the inventor or an engineer himself
• Mass production allowed for the price drop of their Autos ("Tin Lizzy") to 295$
• Built a one-of-a-kind distribution system with gas stations, and boosted the expansion of the highway system.
• Ford introduced the eight-hour day in 1914.
• Ford raised the wage to a very high five dollars/day at the time
• Ford drove his workers ruthlessly
• Until 1927, he sold over 15 million "Tin Lizzies".
• He failed to develop replacement models in time and was passed over by General Motors.

Ray Kroc (1902-1984) — Examples of Successful Entrepreneurship

• In 1954, as a salesperson, he sold mixers to the brothers Dick and Mac McDonald.
• McDonald's was standardizing fast foods and beverages at competitive prices
• McDonald’s focused on high quality with fast serving times of 30 seconds.
• Kroc believed the concept matched with societal trends and they later opened restaurants together
• In 1961 Ray Kroc obtained McDonalds for the McDonald brothers, apart from the actual brand.
• The concept of the quick, fresh production of meals was adopted from the McDonald brothers from Kroc, though he was more ambitious and efficient while doing so.
• Since around the early 2000s, however, growth in various countries has continuously shrunk due to competitions like "Subway".

Dietrich Mateschitz- Examples of Successful Entrepreneurship

• In the 1980s observed that the Asian managers are taking the syrupy liquid to keep them concentrated (Thai Name of the product: Krating Daeng)
• Drinks were modified to suit European tastes
• Red bull in 1987 sold translated names of Thai original products. Red bull was sold in 1994 in Germany/ Switzerland and also in 1997 in the USA
• It focuses on core competences such as sports sponsoring, advertising and marketing
• More than 12 billion Dosen produced in one year
• After 2009 for the first time in years, the increase rates dropped.

Steve Jobs — Examples of Successful Entrepreneurship

• 1976 Appled wads found by Ingenieur (Wozniak) und Entrepreneur (Jobs)
• 1976 Apple I and in 1977 Apple II (2 million time sells)
• 1984 MacIntosh: first PC is started with the graphical application.
• 1984 was the year Steve Jobs has to let go of his company.
• In 1984 Job starts NeXT (later is taken over by Apple ) and Pixar (later by A.)
• From 1998 iPod and iTunes was a great commercial success.
• 1996 back to his former company almost broke again.
• 2007 launch iPhone

Joseph Schumpter

• Important person for entrepreneurial research, (1883-1950), being an Austrian finance minister.
• Professor in different cities all around the world such as Graz, Bonn and Harvard
• Considered one of the most recognised economics.

Arbitration vs. Creative

• Arbitrageur: Maximizing the most out of known technologies
• Creative: Making newer customer or technical solutions

Schumpter

• A creative restructuring of products and procedures by companies in order to be better than the last.
• Known Innovator or "Recombinant Innovation" : Known for the invention of innovative products and concepts. Schumpter had the view to seek out the new ideas to make a profit.
• Pioneer Companies can always be sought out by competitors even with a dynamic competition process.

Innovation

• Disruptive is when already existing tech is overthrown with a newer product.
• Business Model Innovation: Is when a product or process turns obsolete.
• Uber disrupting businesses as well as Netflix and Air Bnb

Valuecreation and Value Distribution

• Win-Win situations after the start to be created when creating more value.
• Key point is, value creation is more efficient and effective when using resources
• To also create a valuable situation over the whole comapny.
• To be more open to be innovative, should be creative and invest to gain more earnings.

Reflections: Key factors to reflect on the company

• Under 20% start their business in 3 years time.
• 10 % do it in 5 yaers
• Failure is a normal factor
• Starting business is still rare for under US People compared