Fundamentals of Business Administration
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Questions and Answers

Which of the following is NOT a fundamental term of business administration as described in the content?

  • Models for structuring companies
  • Framework of a company
  • Localization of business administration as a science
  • International trade agreements (correct)

    • What is the significance of understanding the "company framework" in business administration?

  • It outlines the company's marketing and sales operations
  • It helps determine the company's legal structure
  • It sets the company's financial goals and strategies
  • It provides a framework for understanding and managing the company's internal operations. (correct)

    • Which of the following is NOT a model for structuring companies?

  • Matrix structure
  • Divisional structure
  • Functional structure
  • Competitive structure (correct)

    • What is the primary purpose of studying the "constitutive decisions of companies" in business administration?

    <p>To understand the legal requirements for starting a company (A)</p> Signup and view all the answers

    Why is it important to localize business administration as a science?

    <p>Because business practices and regulations vary significantly between countries and regions (B)</p> Signup and view all the answers

    What is the primary goal of 'Economization' (III) as shown in the text?

    <p>To minimize input while maximizing output. (C)</p> Signup and view all the answers

    What does the text suggest is considered 'fixed' in the context of 'Economization' (III)?

    <p>Resources used in the process. (C)</p> Signup and view all the answers

    What is a possible interpretation of the text's representation of 'Economization' (III) as a business principle?

    <p>Companies should strive to maximize profits by using the least resources. (B)</p> Signup and view all the answers

    What is the key principle that governs the efficient combination of production factors?

    <p>Maximize output while minimizing inputs. (D)</p> Signup and view all the answers

    According to the Minimum Principle, which approach should be prioritized for achieving a particular yield?

    <p>Using the least amount of resources possible. (B)</p> Signup and view all the answers

    What is the significance of the copyright information at the bottom of the text?

    <p>It confirms the text is an original work by the authors. (D)</p> Signup and view all the answers

    What is the primary focus of 'Economization' (III)?

    <p>Maximizing profits by minimizing input. (D)</p> Signup and view all the answers

    What concept is most closely aligned with the Minimum Principle?

    <p>Production optimization (C)</p> Signup and view all the answers

    Which of the following scenarios contradicts the Minimum Principle?

    <p>A farmer increases fertilizer usage to improve crop yield, even though it increases production costs. (B)</p> Signup and view all the answers

    Which statement best explains the rationale behind the Minimum Principle?

    <p>Resource availability is always limited, necessitating efficient use. (B)</p> Signup and view all the answers

    What is the fundamental assumption about resources that underlies the need for companies?

    <p>Resources are limited and scarce. (D)</p> Signup and view all the answers

    What is the driving force behind the existence of companies?

    <p>To provide goods and services to meet consumer needs. (B)</p> Signup and view all the answers

    What is the relationship between the axiom of insatiability and the assumption of scarcity?

    <p>The assumption of scarcity fuels the need for solutions addressed by the axiom of insatiability. (B)</p> Signup and view all the answers

    Which of the following best describes the role of companies in a market economy?

    <p>Companies are intermediaries between consumers and limited resources. (A)</p> Signup and view all the answers

    How do companies contribute to addressing the gap between unlimited needs and limited resources?

    <p>Companies efficiently allocate scarce resources to meet those needs. (E)</p> Signup and view all the answers

    Which of the following best describes the idea of a 'constitutive decision' within a company?

    <p>Decisions that define the fundamental nature and purpose of the company. (D)</p> Signup and view all the answers

    What is the relationship between the 'economic-political framework' and the 'economic order'?

    <p>The economic order is a specific, concrete example of an economic-political framework. (A)</p> Signup and view all the answers

    Which of these is NOT a factor that influences the economic-political framework?

    <p>Consumer preferences and buying habits. (A)</p> Signup and view all the answers

    Why are constitutive decisions particularly important in a company's early stages?

    <p>Because they have a permanent impact on the company's structure and direction. (C)</p> Signup and view all the answers

    Which of the following is an example of a constitutive decision?

    <p>Establishing the company's mission statement and core values. (A)</p> Signup and view all the answers

    What is the primary role of the 'economic-normative framework' in relation to a company?

    <p>To provide a set of guidelines for ethical and socially responsible business practices. (D)</p> Signup and view all the answers

    Which of the following is NOT an element of the 'economic order'?

    <p>The cultural values and norms that shape consumer preferences. (C)</p> Signup and view all the answers

    How does the 'economic-political framework' influence the company's 'constitutive decisions'?

    <p>It determines the legal structure and regulatory environment for the company. (C)</p> Signup and view all the answers

    What is the primary focus of a shareholder?

    <p>Maximizing their own financial return. (B)</p> Signup and view all the answers

    What is the main difference between a stakeholder and a shareholder?

    <p>Shareholders are only interested in financial returns, whereas stakeholders are concerned with a wider range of issues. (A)</p> Signup and view all the answers

    Select the option that is NOT a stakeholder in a company.

    <p>Competitor (A)</p> Signup and view all the answers

    Which of these is a common example of how a company can consider the interests of various stakeholders when making decisions?

    <p>Balancing short-term financial gains with long-term social and environmental impacts. (C)</p> Signup and view all the answers

    A company can prioritize shareholder value over stakeholder value by doing which of the following?

    <p>Maximizing short-term profits even if it harms the environment. (D)</p> Signup and view all the answers

    How does the stakeholder concept impact the decision-making process in a company?

    <p>It makes decisions more complex, as the company must consider multiple perspectives and interests. (D)</p> Signup and view all the answers

    What is the overarching benefit of adopting a broad stakeholder approach in a company?

    <p>Enhanced long-term sustainability and reputation. (D)</p> Signup and view all the answers

    Which of these is NOT a key factor companies consider when trying to balance stakeholder interests?

    <p>Competitor actions (C)</p> Signup and view all the answers

    Flashcards

    Constitutive Decisions

    Fundamental choices that shape a company's structure and operations.

    Importance of Companies

    Companies exist to provide goods and services to fulfill needs.

    Scarcity

    The limited availability of resources to meet unlimited needs.

    Axiom of Insatiability

    The concept that human needs and wants are never fully satisfied.

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    Goods and Services

    Products (goods) and activities (services) offered to satisfy needs.

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    Minimum Principle

    Combine production factors to achieve maximum yield with minimum input.

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    Factors of Production

    Resources used to produce goods and services, including land, labor, and capital.

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    Yield

    The amount of output produced from a given set of inputs.

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    Input

    Resources put into production to achieve a desired output.

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    Efficiency in Production

    Achieving maximum yield with the least amount of input.

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    Business Administration

    The management and organization of business operations.

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    Localization as Science

    The process of adapting business practices based on local market conditions and regulations.

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    Company Framework

    The structure and systems within which a company operates.

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    Models for Structuring Companies

    Frameworks or theories that guide the organization of a business's operations and teams.

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    Economization

    The process of effectively using resources to maximize outputs.

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    Output

    The result or product generated from the input in a system.

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    Maximize

    To make as large, great, or high as possible.

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    Stakeholders

    Individuals or groups that have an interest in the success of a business.

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    Shareholders

    People or institutions that own shares in a company.

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    Value Creation

    The process of generating benefits for stakeholders.

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    Business Interests

    The various goals and concerns of stakeholders.

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    Management Decisions

    Choices made by executives that affect stakeholder value.

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    Stakeholder Engagement

    The process of involving stakeholders in decision-making.

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    Corporate Social Responsibility (CSR)

    A company's commitment to conducting business ethically.

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    Impact Assessment

    Evaluating the effects of business decisions on stakeholders.

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    Constitutive Decisions Importance

    They guide the strategic direction and framework of a company.

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    Economic Framework

    The system of economic rules and policies guiding businesses.

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    Normative Framework

    Set of principles and values guiding business ethics and practices.

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    Economic Order

    The arrangement of economic activities and institutions in a society.

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    Economic-Political Framework

    The interaction between economic policies and political regulations affecting businesses.

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    Business Operations Structure

    The way a company's processes and departments are organized to achieve goals.

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    Strategic Direction

    The long-term goals and plans set by a company to steer its growth.

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    Framework Decisions

    The choices underlying the operational and strategic setup of a business.

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    Study Notes

    Fundamentals of Business Administration

    • The course covers five parts: The Fundamentals, Level of Value Definition, Level of Value Creation, Level of Value Assessment, and Exam Preparation.
    • Part I: The Fundamentals includes understanding fundamental business administration terms, localizing business administration as a science, determining the business framework, understanding models for structuring companies, and recognizing the significance of constitutive decisions in companies.

    Why do Companies Exist?

    • Companies exist to satisfy unlimited needs with limited resources.
    • This is explained by the "assumption of scarcity" and the "axiom of insatiability".

    Subject Matter (I)

    • The subject matter of business administration is the economization of enterprises.
    • This involves economic activity and using resources efficiently.

    Subject Matter (II)

    • A first classification of the subject matter involves economic entities, economization, types of goods, markets, and stakeholders.

    Ad 1. Economic Entities (I)

    • Economic entities are classified into households (private and public) and enterprises (public and companies).
    • Companies primarily operate under private ownership.

    Ad 1. Economic Entities (II)

    • Organizations are classified based on types of goods, size, profit orientation, and stage of development.

    Ad 1. Economic Entities (III)

    • A classification by type of goods categorizes industries by stages of raw material conversion into finished goods and, eventually, consumer products. Service industries exist as a separate category.

    Ad 1. Economic Entities (IV)

    • Enterprise size is defined by the number of employees and revenues.
    • Micro, small, and medium-sized enterprises are defined according to European Commission regulations.

    Ad 1. Economic Entities (V)

    • Organizations are further classified by their profit orientations. Illustrative logos of companies who follow certain organizational principles are shown.

    Ad 1. Economic Entities (VI)

    • Classification by the business life cycle. The graph shows the startup phase, growth, maturity and decline phases of organizations.

    Ad 2. Economization (I)

    • Economization is about using scarce resources efficiently to meet unlimited needs.
    • A simple model shows the input, transformation, and output of this process.

    Ad 2. Economization (II)

    • Economic principles have maximum and minimum concepts.
    • The maximum principle aims for maximum output with a given input.
    • The minimum principle seeks to achieve a given output with minimum input.

    Ad 2. Economization (III)

    • The maximum principle aims for maximizing output with a fixed amount of inputs.

    Ad 2. Economization (IV)

    • The minimum principle seeks to minimize inputs to achieve a certain output.

    Ad 2. Economization (V)

    • The principle of optimization aims at maximizing the difference between input and output in the transformation process.

    The Homo Oeconomicus and the cobra plague

    • The model of Homo Oeconomicus describes an "economically" thinking person, with abilities for unrestricted rational behavior, striving to maximize profit/benefit, complete information about all options and their consequences, and consistent preferences.

    Ad 2. Economization (VI)

    • Performance indicators such as productivity and profitability are used to measure the success of economization.
    • Productivity equals the amount of output divided by the amount of input.
    • Profitability is the evaluated amount of output divided by the evaluated amount of input.

    Ad 2. Economization (VII)

    • Calculation of productivity for entire companies is problematic due to differences in input factors.
    • Consequently, calculation of partial productivity is a better approach.

    Ad 2. Economization (VIII)

    • Effectiveness measures the degree to which the objective has been accomplished. It is calculated as outcome divided by objective.
    • Efficiency is the cost benefit ratio, comparing output with input, representing the economic efficiency of resources spent.

    Ad 3. Type of Goods (I)

    • Classification of goods into economic (scarce) and non-economic (free) goods.
    • Further distinctions are based on tangibility/intangibility, intermediate/finished goods, and single/durable use.

    Ad 3. Type of Goods (II)

    • A cube diagram illustrates combinations of tangible and intangible goods based on the type of use as well as intended use.

    Ad 3. Type of Goods (III)

    • Distinction between products and services, along with examples of each.

    Ad 4. Markets (I)

    • Markets consist of all economic entities that supply and demand goods substitutable among each other.
    • A simplified supply and demand curve is graphed to illustrate this.

    Ad 4. Markets (II)

    • Different types of markets, such as a capital market, a market for intermediate goods, an enterprise market, a physical market, and a labor market are mentioned

    Ad 5. Stakeholders (I)

    • A V-shaped figure represents the value of both shareholders and stakeholders.

    Ad 5. Stakeholders (II)

    • A shareholder value approach determines company value from the perspective of the owners.

    Ad 5. Stakeholders (III)

    • Stakeholder groups are identified according to how they influence or are influenced by the business activity.

    Ad 5. Stakeholders (IV)

    • A table outlines corporate goal/objectives, interest groups, success factors and main challenges for stakeholders.

    Example of Application: Airport

    • Illustrative example of stakeholders in an airport that could be included in this part: investors, employees, and the public/population.

    Group Exercise: Airport

    • The task is to identify airport stakeholders and understand their interests, and determine possible conflicts between stakeholders’ interests.

    Part I: The Fundamentals (repeated)

    • Understanding fundamental business administration terms, localizing business administration as a science, determining the business framework, understanding models for structuring companies, and recognizing the significance of constitutive decisions in companies.

    Categorization within Science

    • Science can be viewed as a systematic extraction of insight for knowledge enhancement or as the result of correlated insights of a subject field.

    Business Administration as Science

    • Business administration categorized as a science builds on prior fields of economic and cultural studies.

    Theories in Business Administration

    • A list of theories in business administration includes resource dependence theory, resource orientated theory, contingency model, diffusion theory, transaction cost theory, principal-agent theory, property rights theory, decision theory, motivation theory, justice theory, attribution theory, network theory, game theory.

    Typical questions in practice

    • Examples of questions that might be raised in practical business settings, including business strategy success/failure, cost reduction opportunities, pricing for new products, company performance fluctuation, interdepartment communication and product success potential.

    The economic and normative framework

    • The framework encompasses the economic-political framework (e.g., centralized, free-market, and social market economies), along with the normative framework including guidelines of an organization, the need for a scope of action for employees, and targeting orientation as defining the organizational principles used in various economic models.

    Ad 1. Centralized Economy

    • An economic system where the government controls the means of production and distribution. The principles include plan fulfilment and state guarantees.

    Ad 2. Free Market Economy

    • An economic system where market forces determine production and distribution, guided by the principles of free markets and financial balances.

    Ad 2. Social Market Economy

    • An economic system emphasizing the principles of a welfare state, including competition, economic cycle policies, and social policies, structural policies and public companies.

    The normative framework of a company (I)

    • Guidelines given by the organization in terms of employee scope of action, and target orientation

    The normative framework of a company

    • Includes company vision, company mission, value system, and target system.

    Ad 1. Vision (I)

    • Company vision is what the company aims for in the long term, and this is usually communicated to employees to motivate them (e.g., "A computer on every desk and in every home").

    Ad 1. Vision (II)

    • Representative logoes from certain industries with corresponding visions.

    Ad 2. Mission (I)

    • A company's activities today, focused on all stakeholders
    • Differentiation between customer- and product-oriented approaches.

    Ad 2. Mission (II)

    • Examples of company missions from various industries.

    Ad 3. Values (I)

    • Values supporting the vision, shaping corporate culture, and directed towards employees.

    Ad 3. Values (II)

    • Classification of the value system by corporate identity and principles/practices (code of conduct).

    Ad 3. Values (III)

    • Statements of values from companies, such as Google (e.g., "put users first").

    Ad 3. Values (IV)

    • Detailed discussion of Volkswagen's values focusing on responsibility and sustainability.

    Ad 4. Target System

    • Performance, financial, product/market, social, and environmental targets are all components of organizational targets.

    Corporate Social Responsibility (CSR)

    • Definition and examples of CSR practices in different organizations.

    Introduction to Production & Operations

    • The objective of production and operational processes is to transform inputs into outputs efficiently and effectively.

    Subdivision of Industrial Production

    • The process of manufacturing parts and subsequently installing them.

    Airbus Inventory Challenge

    • Description of the complexity of parts and production processes required to build airliners, such as the A380.

    Objectives of Production

    • Objectives of production are grouped in three categories: Cost Objectives (Production Costs, Construction Costs), Time Objectives (Deadline Compliance, Lead Times) Performance Objectives (Quantity, Quality).

    Duties of the Production Management

    • Description of the system of production and its design from operational & strategic points of view. This includes design of production system and implementation of production planning & controlling.

    Ad 1. Design of the Production System (I)

    • Production program, order penetration depth, process types, and organizational types are described and defined as components of the organizational production design.

    Ad 1. Design of the Production System (II)

    • Procurement strategies and the production depth (0% to 100%). Production depth of 0% means a company relies entirely on external procurement. 100% production depth means a company produces all parts internally.

    Ad 1. Design of the Production System (III)

    • Relevant factors influencing production depth, both ex ante/before the start and ex post/after the start. Example companies, such as watches (A. Lange & Söhne) and newspapers, illustrate the different production depth approaches.

    Ad 1. Design of the Production System (IV)

    • Discussion of factors affecting production depth, both before (ex ante) and after (ex post) the start of the production process.

    Ad 1. Design of the Production System (V)

    • Order Penetration Point (OPP) and the difference between Make-to-Stock and Assembly-to-Order production strategies

    Ad 1. Design of the Production System (VI)

    • Made-to-order (Auftragsfertigung) or customized production.

    Ad 1. Design of the Production System (VII)

    • Classifications of production types: individual manufacture, serial production, and mass production are detailed, along with their associated advantages and disadvantages.

    Ad 1. Design of the Production System (VIII)

    • Examples of products or services that exemplify the classifications of individual manufacture, serial production, and mass production.

    Ad 1. Design of the Production System (IX)

    • Organization types are described as spatial arrangement of equipment and the way products and equipment are moved during different stages of the production process.

    Ad 1. Design of the Production System (X)

    • Workshop production concept: spatial concentration of equipment for similar tasks.

    Ad 1. Design of the Production System (XI)

    • Group manufacturing: grouping of machines for similar job categories or processes.

    Ad 1. Design of the Production System (XII)

    • Linear Production: spatial arrangement of equipment to follow a sequential production flow.

    Questionnaire

    • A summary of the questions for a business administration study session, involving detailed descriptions, classifications, and applications of various business elements.

    Marketing and its Objectives

    • Subject matter of marketing: planning and implementing product-oriented activity for the goal of generating revenues.
    • Marketing objectives: Gain market share, generate revenues, boost product and company image, contribution margin calculation, and other objectives.

    Marketing Mix (I)

    • Four P's of Marketing (Product, Price, Place, Promotion).

    Different Accounting Standards

    • Financial accounting principles: difference between the German HGB and US GAAP standards
    • Trend towards standardization, such as IFRS standards.

    Investment & Finance

    • Investment involves an initial outflow of funds expecting higher inflows in the future.
    • These are related to acquisition and utilization of assets.
    • Finance relates to an initial inflow of funds for which future outflow is anticipated.

    Categorisation of Finance

    • Internal financing uses previous period profits.
    • External financing involves external funds (investor equity or loan debt).

    Equity vs. Debt

    • Differences discussed regarding ownership, liability, participation in profit/loss, repayment, and tax implications.

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    Fundamentals of Business Administration PDF

    Description

    Test your knowledge on the fundamental terms and concepts of business administration. This quiz covers important topics such as company frameworks, constitutive decisions, and the principles of economization. Prepare yourself to enhance your understanding of business structures and objectives.

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