Business Plans & Multinational Companies Quiz

Introduction to Business Management

• A business aims to meet the needs and wants of individuals or organizations.
• Resource inputs include human, physical, financial, and enterprise.
• Factors of production: right quantity and quality of human, physical (land and machinery), financial (cash), and enterprise (innovator, risk-taker).
• Production processes can be capital-intensive or labor-intensive.
• Capital-intensive processes use more machinery than labor inputs.
• Labor-intensive processes heavily rely on labor.
• Business functions: operations, marketing, human resources, and finance.
• Specialized versus one-man-show.

Business Activity Sectors

• Goods:
  • Primary: raw materials (farming, mining, extraction).
  • Secondary: processed or manufactured goods; categorized as durables or non-durables.
• Services:
  • Tertiary: nonphysical services (product/service).
  • Quaternary: focused on knowledge (e.g., education, research, and development).

Sectors of the Economy

• Primary: extraction of raw materials.
• Secondary: manufacturing.
• Tertiary: service sector.
• Quaternary: specialized knowledge and services.

Sectors and Integration

• Lower costs and supply availability.
• Avoidance of government regulations.
• Increase in market power and weakening competitors.
• Horizontal integration (merging/acquiring similar business).
• Vertical integration (acquiring companies at different stages of the production).

Entrepreneurship and Startups

• Entrepreneur: individual who demonstrates initiative, making a profit (often self-employed).
• Intrapreneur: employed individual who exhibits entrepreneurial thinking.
• Qualities of entrepreneurs: innovative, motivated, multi-skilled, etc.
• Startups: companies in initial stages.
• Characteristics of startups: often funded by outside investors, young, innovative, fast-growing, smaller teams.

Impact on Enterprise and Business Creation

• Employment creation: self-employment and new jobs.
• Economic growth: increase in GDP and living standards.

Market Opportunities and Problems

• Identifying market opportunities: own skills or hobbies, experience, franchising conferences, market research.
• Problems faced by startups: competition, lack of record-keeping, financing issues, poor management skills.

The Business Idea Stage

• Market-driven: determined by market needs.
• Service-driven: convincing others the product/service is worth purchasing.

The Planning Stage

• Organizing the basics: location, name, legal structure, operational structure, infrastructure, services.
• Refining the business idea: market research (e.g, target market, USP), conducting market research, who will be the target market, and can the business test its concept.
• Planning the business: communicating the business to the market.

Business Plan

• Importance: crucial for securing funding from investors and banks.
• Purpose: guiding the business launch and attract finance, identification of resource needs, provide a focus for development, a measure of business success.
• Users: stakeholders to assess the viability and success measure of the business.
• Contents: executive summary, business opportunity description, entrepreneur details, what is being sold, why, and to whom.
• Public vs Private sector.

Sole Trader

• Features: owner is the business, no legal distinction between the business and owner, limited funding, close customer proximity.
• Advantages: profits belong to the owner, complete control over decisions, flexibility in operations, privacy.
• Disadvantages: complete dependence on owner, challenging to compete against established businesses, lack of business continuity in case of accident.

Partnership

• Features: multiple owners, joint business decisions, no legal distinction between the business and partners, finance generally more available compared to a sole trader business.
• Advantages: greater efficiency via specialization, access to more expertise, more access to finance, partners can help each other during emergency or absences.
• Disadvantages: unlimited liability for business debts of other partners, reduced access to loans because investors fear the instability, profit sharing.

Companies/Corporations

• Features: separate legal entities from its owners, limited liability to company debts, comparatively greater access to finance.
• Advantages: easier access to finance, continuity of business, more stability.
• Disadvantages: cost and time to set up the company, reduced day to day control, loss of privacy.

Social Enterprises and Charities

• Features of social enterprises: advance a social purpose via profit.
• Features of charities: relieve needs in a community without using the profit margin.
• Purpose of a social enterprise: help people in need, foster a charitable spirit, and increase conversation about resource allocation, and innovation.

Vision and Mission Statements

• Vision statement: philosophy or principles guiding an organization (goals, values).
• Mission statement: states a company's purpose or reasons for existence.

Business Objectives

• Business objectives: measurable targets to achieve company aims.
• Strategic objectives: long-term goals to fulfill mission.

Effectiveness of Statements

• Advantages: informing external stakeholders, motivating employees, defining a business' purpose, building accountability.
• Disadvantages: too vague or general, focusing on public relations.

Aims vs Objectives

• Aims: long-term goals.
• Objectives: intermediate to shorter-term goals to reach the aims.

Hierarchy of Objectives

• Connection between aims/objectives/strategies.

Impact of External Environment

• External environment considerations from the STEEPLE framework (Social, Technological, Economic, Environmental, Political, Legal, Ethical).
• PESTLE/PEST and STEEPLE models are used to consider external elements' impact and to use as a guide.

Economies of Scale

• Internal economies of scale: occurring in the business.
• External economies of scale: happening because other businesses expanded, leading to efficiency.
• Diseconomies of scale: efficiency decreases as size increases.

Cost Control

• Fixed costs (don't fluctuate with output).
• Variable costs (dependent on output).
• Costs can be used as a method to control efficiency.
• Economies of scale, resulting from decreasing per-unit costs, as a company grows.
• Diseconomies of scale, conversely, increase in costs resulting from decreased efficiency, as a company grows.

Internal/External Diseconomies of Scale

• Internal diseconomies: occur within a business itself.
• External diseconomies: arise from factors outside the business.

Growth Strategies

• Mergers and Acquisitions: Combining two businesses, buying one company.
• Horizontal integration: merging/acquiring companies in the same industry.
• Vertical integration: merging/acquiring companies at different stages of the value chain.

Strategic Alliances

• Joint ventures: creating a separate entity (temporary period).
• Strategic alliance: agreement to work together (membership is more fluid).

Globalization

• The world's economies integrate as a single, single entity.
• Greater opportunities.
• International expansions: Advantages and disadvantages.
• Multinational companies vs. Transnational companies, compared and contrasted.

International operations

• Reasons for expansion beyond domestic boundaries, and challenges encountered.

Stakeholders

• Internal and external stakeholders: those directly and indirectly associated with the company.
• Identification and analysis of stakeholders: important in decision-making and building relationships.
• Stakeholder mapping (power vs. interest): helps understand different concerns and interests of stakeholders.
• Stakeholder models: used to understand stakeholder concerns and how to interact with them.

Decision Making

• Decision trees: visual tool to structure decisions in complex situations.
• Possible choices, probabilities, outcomes, costs, expected values (EV).
• Choosing the optimal decision based on expected value (EV).

Franchising

• Franchising operations: advantages and disadvantages.

Other Topics

• Market positioning, SWOT analysis, and Porter's 5 forces (helpful analysis tools).