Business Operations and Value Chain Analysis

Macro and Micro Economies

• Macroeconomics deals with the entire economy, covering issues like production, growth, and economic crises.
• Microeconomics examines individual economic agents like households, firms, and organizations.

Business Administration

• Setting and Achieving Goals: Includes planning, executing, and controlling business operations.
• Operational Management: Focuses on the daily activities of running a business, including production, distribution, and customer service.
• Efficiency: Maximizing output with minimal input.
• Accounting: Recording, summarizing, and reporting financial transactions.
• Life-Cycle Management: Managing business operations through different stages in a product's or company's life.
• Demand and Supply: Covers the interaction between consumers and producers in the market.
• Managing Resources: Involves allocating and utilizing resources effectively.
• Project Management: Planning, executing, and controlling projects to achieve specific goals.

Economic Principles

• Scarcity of Resources: Limited resources mean that choices must be made about how to use them.
• Economic Needs: Basic human needs (e.g., food, shelter).
• Economic Goods: Goods that satisfy human wants/needs; goods with a value or are exchangeable in a marketplace.
• Economic Needs: Basic human needs (e.g., food, shelter).
• Economic Goods: Goods that satisfy human wants/needs; goods with a value or are exchangeable in a marketplace.
• Optimum Principle: Maximizing output with minimal input.
• Economic Goods: Goods that satisfy human wants/needs; goods with a value or are exchangeable in a marketplace.
• Economic Resources: Materials, labor, and capital.

Economic Elements

• Economic Needs: Physiological and existential needs of humans.
• Economic Goods: Tangible goods that satisfy human wants and needs (eg: food, water, shelter).
• Economic Services: Provide benefits or solutions to people's needs (eg: education, healthcare, entertainment).
• Economic Organizations: Businesses and other institutions fulfilling societal needs/wants.
• Stakeholders: People or groups affected by the actions of an economic organization or an economic unit.
• Economic Units: Individual or groups in the economic system.

Economic Indicators

• Efficiency: Output maximized with a given input.
• Productivity: Output per unit of input.
• Effectiveness: Achievement of goals.
• Profitability: Income > cost.

Market Economies

• Plan Economy (Socialism): A centrally planned economy, with little or no private ownership of resources, and with government as the sole decision maker.
• Market Economy (Liberalism): An economy where individuals and companies make the majority of decisions about the production, allocation, and distribution of goods and services.
• Social Market Economy: A market economy with government regulations and social safety nets to maximize social benefits.

Functional Structure

• Cross-functional: Multiple departments work together.
• Basic Functions: Accounting, HR, marketing, sales, production etc.
• Top Management: Strategic decision makers in an organization.
• IT and Legal: Maintaining essential technology and ensuring compliance.

Operational Management

Conversion of resources into goods/services to maximize productivity. This approach takes into consideration labor cost, automation, and technological advancements in production.

Operational Turnover Process

• Includes responsibility transfer for smooth transition.
• Systematic process essential for efficient functioning; applies to transfers among employees and workflows.

Value Chain Management

• Value chain: all activities performed by the company to produce worthiest product or service.
• Activities can be divided into upstream activities (design, research & development), transformation (production & manufacturing), downstream (marketing & sales).
• Managing through a perspective allows for efficiency and synergy.

Business Sector / Industry

• Groups of companies with similar primary business activities.
• Examples: Tourism, manufacturing, or finance.
• Labor-intensive: Relating to use of labor with high cost. → Service Companies.
• Investment-intensive: Companies requiring large capital investments.
• Material-intensive: High raw material costs.
• Knowledge-intensive: Companies with high percentages of scientists/engineers.

Business Location

• Factors to consider include labor, raw materials, infrastructure, and political climate.

Companies Life-Cycle

• Start-ups: Companies in early development stages experiencing innovation from new products/services.
• High-Growth: Stage characterized by significant progress and lack of resources.
• Incumbents: Large, established companies with a vast product portfolio.

Internationalization

• Extent of geographical spread, types of business units, and methods for expanding to new markets.
• Export: Goods/services from own country to a foreign country.
• Franchising: License granted to an external party, allowing them to operate product/service according to franchiser's rules.
• Joint Venture: Partnership with external party to create new entities to grow and operate.
• Foreign Office: Office or representative function solely in a foreign country.
• Subsidiary: Legally independent entity in a foreign country, completely separate from the headquarters.

Legal Entities

• Types in Germany: Sole proprietorships, partnerships (e.g., OHG, KG), private limited companies (GmbH), stock corporations (AG), and European companies (SE).
• Factors determining legal entities include liability, capital raising, governance, and publicity/audit requirements

Inter-Company Cooperations

• Forms: Consortium, cartel, strategic alliances, joint ventures, groups (Konzern).
• Company Diversification:
  • Horizontal: Expansion of operations with related products/services.
  • Vertical: Involvement in different stages of the value chain through forward or backward integration.
  • Lateral: Completely new product/market segment.

Organizational Design and Principles

• Organizational Elements: Tasks, operations, and positions.
• Organizational Principles: Competence and responsibility for organizational tasks.
• Process Organization: Meeting deadlines, minimizing time, and maximizing efficiency.
• Correlation: Organizational structure and processes are related; a suitable structural framework enhances process efficiency.
  • Structure: Design of tasks, operations, and positions to accomplish objectives.
  • Processes: Series of related actions to accomplish activities in a required form.

Modern Organizations

• Agile Organizations: Self-organizing, cross-functional, empower employees
• Telecommuting/Contingent/Flextime: Diverse modern working forms.

Human Resource Management Process

• Human Resource Planning: Identifying, attracting, selecting, and developing employees.
• Job Descriptions & Specifications: Detailed descriptions of roles.
• Recruitment & Selection: Identifying and choosing the most suitable applicants.
• Compensation & Benefits: Pay and additional perks.
• Training: Enhancing employee knowledge & skills.
• Performance Management: Assessing and evaluating performance.
• Career Development: Support for personal and professional advancement.
• External Factors Affecting Process: Economic, labor laws, and demographic changes affect HRM.

Strategic Management

• Mission & Vision Statements: Statement about the organization's purpose and future aspirations.
• SWOT Analysis: Evaluation of internal strengths and weaknesses, and external opportunities and threats.
• Formulating Strategies: Corporate, business, and functional levels of strategy.
• Strategic Analysis: Evaluation of the organization's internal and external environment to inform strategic decisions and actions (using SWOT as a technique.)
• Implementing Strategies: Implementing decisions informed by the analysis.
• Evaluating Results: Assessing the effectiveness of strategies.

Financial Accounting

• Communication of financial information to stakeholders (internal or external stakeholders).
• Process of identifying, recording, and summarizing financial transactions.
• Reporting to decision makers.
• Bookkeeping as an integral part of financial accounting.
• Financial reports;
  • Balance sheet information:
    • Assets vs. liabilities
    • Owners' equity

Balance Sheet Transactions

• Transactions affecting the balance sheets and assets and liabilities
• Assets - things owned
• Liabilities - money owed by a company
• Equity - Residual ownership interest or residual value.

Revenue and Expenses

• Income received from customers for goods or services.
• Costs incurred to produce those goods or services, and related expenses.

Profit and Loss Accounts

• Summary of company's financial performance over a period (or time frame).
• Net income is the result (and the profit, or remainder after deducting all expenses from revenues).
• Net loss is the result when expenses exceed revenues.

Cash Flow Statements

• Provides insights into cash coming in and going out of the organization (or company)
• Three types of cash flow to investigate:
  • Operating activities: Day-to-day business activities, such as sales and procurement.
  • Investing activities: Investments or disposals of assets relating to the business, such as purchasing equipment or investing in a foreign firm.
  • Financing activities: Dealings with investors or lenders, including borrowing money or issuing shares.
• Free cash flow = net cash flow available to investors when capital expenditures are deducted from cash flows.

Liquidity Ratios

• Current ratio = Current Assets/ Current Liabilities: Assess the company's ability to meet its short-term obligations.
• Debt ratio = Total liabilities/ Total Assets: Evaluate percentage of assets financed by debt.
• Debt-to-equity ratio: Total liabilities/Total shareholders’ equity: Indicates the company’s financial strength.

Financial Ratios

• Reflects a company's financial health and performance in terms of its profitability. It provides a quantitative measure for investors and decision makers to utilize.
  • Current Ratio
  • Return on Sales
  • Return on Assets
  • Return on Equity
  • Debt-to-equity ratio
  • Debt-to-total assets
  • Earnings per share (EPS)
  • Price-earning ratio

Cost Accounting

• Objective measurement of resources in monetary terms.
• Types of Costs:
  • Fixed costs: Don't change with volume.
  • Variable costs: Change proportionally with volume.
  • Direct Costs: Traceable to a single product or cost object.
  • Indirect Costs: Not attributable to one particular product or cost object.
• Cost accounting methods: Absorption Costing and Variable Costing.

Cost-Volume-Profit Analysis (CVP)

• Profit is influenced by volume, selling price, and cost.
• Break-even analysis is part of this type of analysis.
• Analyzing changes in profit based on changes in volume / pricing / costs allows for optimal decision-making.

PESTEL Analysis

• Analysis of macro-environmental factors affecting business performance.
• P: Political factors (government policy, regulations)
• E: Economic factors (growth rates, inflation)
• S: Social factors (demographics, lifestyle trends)
• T: Technological factors (innovations, automation)
• E: Environmental factors (pollution, sustainability)
• L: Legal factors (laws, regulations)

SWOT Analysis

• Assessing internal strengths and weaknesses and external opportunities and threats.
• S: Strengths
• W: Weaknesses
• O: Opportunities
• T: Threats

This quiz tests your understanding of key concepts related to business operations and value chain management. Questions cover topics like production factors, departmental responsibilities, and the focus of value chain analysis. Perfect for students and professionals looking to deepen their knowledge in operational management.