Basic Principles of Business Administration Lecture Notes PDF

Lecture notes to accompany the lecture: "Basic Principles of Business Administration" page 1 from 62  Definition of "business administration" Business administration is the management of companies. This includes the monitoring and control of all b...

Lecture notes to accompany the lecture: "Basic Principles of Business Administration" page 1 from 62  Definition of "business administration" Business administration is the management of companies. This includes the monitoring and control of all business activities, including finance and marketing. → The focus is on companies and their management. The administration of a company involves the execution or management of business operations and decision-making processes, as well as the efficient organization of people and other resources to direct corporate activities towards common goals. In general, the term "administration" refers to the broader management function, including the related financial, human resources and management information systems. In general, the five functions of management consist of: 1. planning 2. organization 3rd delegation 4. coordination 5. control page 2 from 62  Basics of the economy: needs & goods Needs A need is a human drive and an aspiration that arises from a feeling of lack and is aimed at satisfying or eliminating this feeling. The existence of a need therefore always means the existence of a lack or scarcity. In order to satisfy this lack, economic activity is carried out, i.e. goods and services are provided in an economic manner. What are people's basic needs? 1. existential needs: Eating and drinking, sleep 2. security needs: Housing, health, workplace 3. socialization needs: Contact and communication with other people, friendships, groups 4. needs for social recognition: status, esteem 5. self-actualization needs: Development of one's own individuality Needs can be further subdivided into individual needs and collective needs. Individual needs are needs of the individual person that they can satisfy for themselves. Collective needs are necessities or desires that are felt by many people. Type of goods "Economy" or "economics" means the planned, rational creation or provision of scarce goods and services to satisfy human needs. Scarce goods are goods that are not available in abundance and must first be created or provided through certain actions and activities. A distinction is made between different types of goods: Material goods are those that are tangible. You can see them, touch them and move them from one place to another. For example, cars, shoes, clothing, machines, buildings, wheat, etc. are material goods. Intangible goods are non-physical assets, including services and rights. They are intangible because they have no form or weight and cannot be seen, touched or transferred. Services of all kinds are intangible goods, such as those provided by doctors, engineers, actors, lawyers, teachers, consultants, etc. Consumer goods are the end products that directly satisfy the needs of consumers. Such goods include bread, milk, writing instruments, clothing, furniture, etc. Consumer goods are further subdivided into consumer goods for single use (disposable) and consumer goods for permanent use. Disposable consumer goods are goods that are used up in a single act of consumption. Such goods include food, cigarettes, matches, fuels, etc. Durable consumer goods are goods that can be used over a longer period of time. Examples of such goods are pens, toothbrushes, clothing, scooters, televisions, etc. Capital goods are goods that assist in the production of other goods, such as machinery, equipment, page 3 from 62 agricultural and industrial raw materials, etc. With production goods, a distinction is also made between disposable production goods and permanently usable production goods. Disposable production goods are consumed in a single production process. Such goods include raw cotton, coal used in factories, paper used for printing books, etc. Durable production goods can be used again and again. Such goods are machines, plants, factory buildings, tools, equipment, tractors, etc. Private goods are produced and sold by private companies (e.g. T-shirts) to satisfy the needs and desires of consumers. Public goods are goods that are provided by nature (air) or the government for free use by the general public. There is generally no market for such goods. page 4 from 62  Companies & their place in the economy Companies are legal and organizational units The sentence "Companies are legal-organizational units that are aimed at third parties (private households)" from business administration emphasizes two essential aspects of companies: their legal-organizational structure and their orientation towards external target groups. 1. legal-organizational units: This part of the sentence refers to the fact that companies are regarded as separate legal or juridical entities. This means that a company has its own rights and obligations that are independent of the personal rights and obligations of the owners or employees. The organizational component refers to the internal structure of a company, including its management hierarchy, departments, processes and procedures. These structures enable the company to pursue its objectives and function effectively. 2. direction to third parties (private households): Companies typically operate in the market by offering products or services to external parties, such as private households. This implies that the primary function of companies is to produce and/or sell goods or services to fulfill the needs and wants of consumers. - In business administration, a "plant" tends to refer to the technical and organizational unit in which the actual production or service provision takes place. It is the place where workers, materials and machines come together to produce products or provide services. - A "company", on the other hand, has a broader meaning. It refers not only to the place of production, but also includes the legal and financial structure behind the business. Companies can comprise several operations and also include aspects such as ownership, legal form and relationships with external stakeholders. ➔ While "businesses" focus on the specific places where value is created, "companies" represent the overarching legal and organizational frameworks within which these businesses operate and address external target groups. Companies are therefore social, open, dynamic, technical and economic systems. Their purpose is to provide goods and services (usually with the intention of making a profit). In contrast to a for-profit company, a non-profit company does not pursue economic profit targets. Like any other company, it can plan a business strategy and work towards making money. However, it does not make money in the same way as a for-profit company. Instead, nonprofit organizations make money by leveraging activities related to their mission. Private and public companies Public and private companies differ mainly in their ownership structure and their main objective. Private companies are owned by individuals, groups or private organizations. These include both small family businesses and large, listed companies with numerous shareholders. Their primary goal is usually to make a profit. They strive to increase their market value, maximize profits and achieve a page 5 from 62 high return on investment for their owners or shareholders. Such companies are often financed by private investments, loans and operating income. In contrast, there are public companies that are owned by the state or state institutions. This can include the national government or local authorities. Public companies are often set up to provide services that are important for the public good and the general interest of society. These include, for example, the provision of education, healthcare or transportation services. Although efficiency and sometimes profitability are important factors, public companies focus on serving the population and promoting the public interest. They are usually financed by public funds, which come from tax revenues. ➔ In summary, the main difference between private and public companies lies in their fundamental orientation and objectives. While private companies are geared towards maximizing profits and conduct their business primarily in the interests of their owners, public companies primarily serve the public interest and are financed by public funds. Companies generally consist of 6 divisions or departments: 1. procurement, materials management: In order to provide goods and services, a company requires funds or resources, so-called production factors, which it must obtain from suppliers on factor markets. 2. production (production factors: materials, equipment, labor): This is the central performance process in which products are manufactured or services are provided through the combined use of production factors. 3. sales: The function of sales is, on the one hand, the sale of products to buyers or customers. On the other hand, it also involves taking all measures to acquire and support customers in the first place. 4. finances, investments: The planning, organization and procurement of financial resources for the procurement of the resources and production factors required for the provision of services is the responsibility of the Finance functional area. 5. human resources: People work in most functional areas of a company and are needed to fulfill their tasks. Their support and administration is carried out by the Human Resources functional area. 6. accounting, controlling: In order for procurement, production and sales to be carried out according to the principle of economic efficiency, the processes must be planned, organized and controlled in a targeted manner. A prerequisite for this is the availability of suitable data and information, which is provided by accounting. It is also about the external presentation of the company and the documentation of company activities. There is also the area of general corporate management. The company management not only bears general responsibility, it is also responsible for managing the company. This includes, in particular, strategic planning and decision-making, organizational alignment and design, the management and control of company processes and, above all, the delegation of tasks and personnel management of the company. page 6 from 62 Stakeholders/interest groups Companies are influenced by various interest groups, which are referred to as "stakeholders". These can come from within the company itself, but can also be external. Stakeholders are all groups, individuals or communities that are affected by the company's activities. Internal stakeholders are individuals or groups who are directly and/or financially involved in the operating process. These include, for example, employees, owners and managers. External stakeholders are indirectly influenced by the organization's activities. These include customers, suppliers, creditors, communities, governments and society in general. Corporate environment A company and its processes are also influenced by the broader business environment, which can be systematized as follows: Economic environment: The economic environment refers to global as well as national and regional economic conditions and developments, such as economic policy conditions, economic development, the income and consumer behavior of the population, the development of price levels, the unemployment rate or the development of exchange rates. Technological environment: The technological environment refers to technical and scientific progress and the associated dynamics on the markets, which are expressed, for example, in shorter product life cycles and the rapid spread of information and communication technologies. The influence of this environment is documented, for example, in the automation of processes or the introduction of computer-aided knowledge systems. Physical-ecological environment: The physical-ecological environment refers in particular to the availability of natural resources and aspects of environmental protection. Especially for companies that extract or process raw materials, the location and the raw materials available there are of great importance. This also includes the corresponding infrastructure required for the transportation of goods to customers. Social environment: The reference points of the social environment are all political, legal, cultural and social aspects and relationships. The political system, the role of the state in the economy and society, legislation and various state regulations and measures form an omnipresent framework for entrepreneurial activity. In a democracy, a constitutional state and a social market economy, companies find very different conditions than in state-administered economies and dictatorships. Social and cultural influences of the social environment arise for companies in particular from demographic factors such as population density, age structure, employment rate, unemployment rate and the level of education of citizens. Companies as systems As systems, companies are connected to their dynamic environment. Entrepreneurs must therefore recognize the potential and actual significance of the various environmental elements for their page 7 from 62 company and react to them as the situation demands if they do not want to jeopardize the company's existence. A system in this context is a group of interacting, interdependent elements that together form a complex whole. Viewing companies as systems means seeing them as complex units that consist of different components and interact with their environment in a variety of ways: 1. social systems (people): Companies are made up of people (employees, management, stakeholders) who interact with each other. These social interactions are crucial to the operation and success of a company. Communication, teamwork and leadership are key elements in this social system. 2. open systems (changes): Companies are open systems as they continuously interact with their external environment. They are influenced by and react to changes in the economy, politics, technology and society. This openness enables companies to adapt and develop, but also makes them vulnerable to external risks and uncertainties. 3. dynamic systems (environment): Companies are dynamic, which means that they are constantly evolving and changing. They must be flexible and adaptable in order to be able to react to changes in their environment, such as new market trends, technological innovations or changes in regulation. 4. technical systems: Companies use technology to optimize their processes and workflows. This includes everything from production facilities and information technology to digital platforms for sales and customer communication. 5. economic systems (minimum/maximum principle): Companies follow economic principles, such as the minimum or maximum principle. The minimum principle means achieving a defined goal with a minimum use of resources, while the maximum principle aims to achieve the best possible result with given resources. Companies strive for efficiency and profitability in order to be economically successful. With regard to non-profit companies: Although these are not primarily geared towards making a profit, they must still operate in an economically efficient manner. They usually pursue social, cultural or ecological goals, whereby economic sustainability is important in order to be able to fulfill their mission. page 8 from 62  Business areas & company types Total number of companies in Germany, size of companies (by number of employees): 3.36 million companies in total - 0-9 employees (90.8%) - 10-49 (7,6%) - 50-249 (1,2%) - 250+ (0,4%) Economic sectors: Trade (600,000), liberal professions (500,000), construction (380,000), residential construction (155,000), manufacturing (221,000), hotels and restaurants (243,000) Types of companies: 1. general distinction: public companies, private companies (sole proprietorships, corporations), other legal forms (e.g. foundations, cooperatives) 2. general types of companies: Partnerships and corporations 3. types of companies: civil law partnership (GbR), general partnership (oHG), limited partnership (KG), limited liability company (GmbH)/ entrepreneurial company (UG), stock corporation (AG) Distinction between partnerships and corporations In business administration in Germany, a distinction is made between partnerships and corporations, with the main differences manifesting themselves in the areas of legal form, liability, capital procurement and company management. Partnerships such as the general partnership (OHG) and the limited partnership (KG) are characterized by the fact that the personal participation of the partners is paramount. Capital in partnerships is usually raised internally by the partners themselves, as these forms of company do not have direct access to the capital market. In terms of company management, the partners are usually directly involved, which enables close ties to the company and quick decision-making. In contrast, corporations, such as the limited liability company (GmbH) and the stock corporation (AG), are designed as legal entities, whereby the focus is on the capital provided and not on the identity of the shareholders. In these forms of company, the shareholders are only liable up to the amount of their capital contribution and not with their private assets. Corporations have easier access to the capital market and can finance themselves by issuing shares or stocks. A corporation is often managed by managers who do not necessarily have to be shareholders. This enables professional company management, but separates the owners from the direct management of the company. page 9 from 62 "The perfect form of society" There is no one company form that is perfect for all business cases and situations. Rather, founders must use various criteria to select the company form that best "fits" their project. The criteria that are relevant for selecting the "right" legal form are as follows: Organization, liability, asset structure, control, operational co-determination, publicity, tax law and financing. ▪ First of all, the organization plays a crucial role. It refers to how the company is structured, including decision-making, internal processes and responsibilities. An effective organizational structure is crucial for the smooth operation and growth of a company. ▪ Liability is another important criterion. It defines the extent to which the owners or shareholders are personally responsible for the company's debts. In some legal forms, such as partnerships, the liability of the owners can be unlimited, while in the case of corporations it is generally limited to the amount of the capital contribution. ▪ Asset management deals with the question of how the company's assets are managed and distributed. This includes aspects such as ownership rights, profit distribution and the reuse of profits within the company. ▪ Control is another key aspect in the choice of legal form. It determines who makes decisions and how power is distributed within the company. In some companies, control lies exclusively with the owners; in others, managers or external stakeholders are also involved. ▪ Company co-determination refers to the extent to which employees are involved in the company's decision-making processes. This varies depending on the size of the company and its legal form. ▪ Publicity means the obligation to disclose certain company information, particularly in the commercial register. This can range from the publication of annual financial statements to regular reports on company performance. Larger and listed companies are often subject to stricter disclosure requirements. ▪ Tax law is also a decisive factor. Different legal forms have different tax implications, both for the company and for its owners and shareholders. ▪ Finally, financing is a key criterion. The choice of legal form influences how a company can raise capital, be it through equity, debt or other financing methods. Example of the choice of a company form appropriate to the purpose: Specifications and initial situation: ▪ 5 founders who are currently still students ▪ This is a commercial activity. ▪ the founders know that they will need a certain, substantial amount of money to set up the company (the exact amount is still unclear, but it will be at least 10,000.00 - 20,000.00 euros) ▪ the founders are concerned about personal liability and want to limit their liability ▪ the founders want a company form that is attractive to investors. page 10 from 62 The possible solution: ▪ The founders cannot opt for a "Gesellschaft bürgerlichen Rechts" (GbR), as the start-up project requires a commercial purpose. They also cannot choose an "e.K." because together they are more than just one person. ▪ You could choose a general partnership (OHG). This form of company has the advantage that no money is required to set up the company and no written contract needs to be concluded (although it is advisable to conclude one). However, this form of company has the disadvantage that the founders are personally liable (everyone is personally liable for everything apart from the company!). ▪ You could opt for a limited partnership (KG). In this type of company, the "general partner" is personally liable. The "limited partners" only have limited liability (corresponding to the amount of their contribution). This form of company has the advantage that it is interesting for certain types of investors. However, there is the problem of the general partner's liability (at least one founder must assume this role in the company). ▪ One solution could be the "Unternehmergesellschaft" (UG). It has the advantage that you can start with money, but without the amount required for a GmbH (which is EUR 25,000.00, even if only half, i.e. EUR 12,500.00, has to be paid in at the beginning). It also has the advantage of being a separate entity from the founders. Liability therefore lies with the company itself and not with the partners as with a general partnership. The disadvantage, however, is that only 25% of the profit can be retained and not much money is available (as no minimum capital is required as with a GmbH or AG). ▪ The solution in this case could be the "limited liability company" (GmbH). This type of company is well-known among investors and is therefore an attractive form of company for them. Liability is limited to the company and therefore does not affect the shareholders. Finally, the minimum capital is EUR 25,000.00, which can be limited to EUR 12,500.00 when the company is founded. This means that at least a certain amount must be available to set up the company; this money can then be used within the scope of the business purpose. page 11 from 62  Location of the company In business administration, the choice of location is one of the fundamental decisions for companies. This decision relates not only to the company headquarters, but can also include production facilities or other branch offices, depending on the specific functions they are to fulfill. Choosing the right location is complex and is influenced by a variety of factors that need to be carefully weighed up. In order to find the right location for the company, factors must be taken into account: ▪ that affect the sales market, ▪ with regard to the production of goods, ▪ in terms of infrastructure and ▪ concerning the social, socio-political and economic environment. First of all, proximity to the sales market is a decisive factor. Companies need to consider where their target customers are located and how easy or difficult it is to reach them. Geographical proximity to important markets can reduce transportation costs, shorten delivery times and strengthen customer loyalty. The availability and quality of the local infrastructure also play a key role. Good transport connections, such as roads, ports and airports, as well as a reliable supply of electricity and internet are essential for many companies. Another important aspect is production. Factors such as the availability and cost of land and buildings, proximity to suppliers and the availability of labor are decisive for production facilities. Environmental regulations and the quality of local suppliers also play a role. In addition to these practical considerations, companies must also take into account the social, socio-political and economic environment. This includes political stability, the economic situation, legislation, tax aspects and the general attitude towards companies and foreign investors. Social factors such as the quality of life, educational facilities and cultural offerings are also important, as they affect the attractiveness of the location for potential employees. ➔ It's not just about finding a location that meets current needs, but also one that offers potential future challenges and opportunities. page 12 from 62  Corporate cooperations Purpose of business cooperations: Companies work together for a variety of reasons. By working together, they can pool resources such as machinery, labor or funding and achieve better results than if they had to bear the costs or provide the resources on their own. In some cases, collaboration also serves to bring together different expertise. For example, a company is good at producing certain goods, but does not have the necessary marketing skills in a particular country and does not have access to distribution opportunities. By cooperating with other companies, it can compensate for its deficits. And finally, companies that are actually competitors can work together on certain orders because they lack the production capacity to handle the order on their own. ➔ Corporate cooperations are often seen as a strategic measure to gain competitive advantages, use resources more efficiently or open up new markets. On the other hand, disadvantages can arise in the form of potential conflicts between the partners, the loss of autonomy, the possibility of unequal distribution of benefits and the risk of knowledge leakage. Types of corporate cooperation: In terms of types of affiliations, there are different forms, each with its own characteristics. Uniformity, as is the case with service stations, means that independent companies follow similar business models or practices, often to maintain a certain market presence or brand identity. ▪ Consortia are temporary associations of companies that are set up to carry out projects for a limited period of time. They are often found in areas such as construction, finance or research. ▪ Associations and federations represent permanently organized groups that represent common interests, usually in a non-economic context. They play an important role in influencing industry standards and political decisions. ▪ Cartels are agreements between companies in the same industry that aim to control prices, production or market distribution. They are regulated or prohibited in many countries due to their potentially anti-competitive nature. ▪ Joint ventures are joint companies established by two or more partners to achieve specific business objectives. They enable the sharing of risks and resources and offer access to new markets and technologies. ▪ Shareholdings refer to the shares that one company holds in another, which can provide influence and control over the company involved. ▪ Groups are large corporate groups consisting of a parent company and several subsidiaries. They can cover a wide range of business activities and utilize synergies within the group. ▪ Finally, mergers are the merging of two or more companies into one, which can lead to a consolidation of market shares and resources. page 13 from 62 ▪ Each of these forms of cooperation has specific strategic and operational considerations and is suited differently depending on the objectives and needs of the companies involved. page 14 from 62  Corporate goals & objectives Corporate goals offer a company: - Orientation & Information, - Decision support, - Motivation, - Coordination aid, - Standard of comparison and evaluation. Typical goals for companies (it is important to always keep an eye on the relationship between the goals: sometimes they complement each other, sometimes they contradict each other): - Securing solvency, - Increase in return on investment, - Minimize costs, - Maximize sales, - Increase in market share, - Increase in productivity, - Job security for the (majority of) employees. Who determines the goals of a company? A company's targets are normally set by the shareholders or the management. However, it is easily possible for targets to be set separately for individual areas of a company or for different markets or for different products, e.g. by country or division managers. Competitive situations can then arise between the individual goals, which is why they should ideally be coordinated or prioritized. The "SMART principle" The "SMART principle" essentially states that corporate goals must fulfill the following criteria if they are to be meaningful and useful: 1st S: specific (clearly, unambiguously and comprehensibly formulated) 2. m: measurable (verifiable) 3rd A: acceptable (motivating) 4th R: realistic (achievable for employees) 5. t: scheduled, timed (who has to do what by when and to what extent) In addition, good goals are formulated in such a way that they do not contradict each other. page 15 from 62 Examples of well and not well formulated corporate goals: Well formulated corporate goals: 1. "Increase online sales of our electronics division by 15% in the first quarter of 2024 through targeted digital marketing campaigns and website optimization." → This target is well formulated as it is specific (increase in online sales in the electronics division) and measurable (15% increase). It is motivating and acceptable, as it appears achievable through targeted measures. It is also realistic and has a clear timeframe (first quarter of 2024). 2. "Reduce employee turnover by 10% by the end of 2024 through improved working conditions and targeted personnel development programs." → This objective is also well formulated. It is specific and addresses the reduction of employee turnover. Measurability is ensured by the quantification of 10%. The target is acceptable and motivating, as it promises positive changes for employees. It is also realistic and has a deadline of the end of 2024. Not well formulated corporate goals: 1. "Increase in customer satisfaction in the near future." → This objective is not well formulated. It lacks specificity as it is unclear what exactly is meant by "increasing customer satisfaction". There is no measurable figure or percentage that would make progress verifiable. It also lacks a clear timeframe of what "in the near future" means, making it vague. 2. "Improvement of the brand in the market." → This objective is also insufficiently formulated. It is not specific, as it is not clear what exactly is meant by "improving the brand". There is a lack of measurable criteria to evaluate success. The objective is too vague and general, without a clear direction or timeframe, which makes it difficult to plan concrete steps to achieve the objective. page 16 from 62  Management/ Executive Board Difference between owner/ proprietor and manager There is a difference between an owner and a manager. The owners of a company are usually the people (or the companies) who own the company. They are therefore the shareholders and have the right to do what they want with their company (as long as the legal framework is observed). A manager is a person who is responsible for a part of the company, i.e. they "run" the company. Managers can be responsible for a department and the people working in it. In some cases, the manager is responsible for the entire company. As a rule, managers are accountable to the owners. Typical management tasks are The tasks of management in a company are diverse and comprise several key elements that are decisive for the successful operation of the company. First of all, setting goals is a fundamental task. These goals must be clearly defined and often set in consultation with the owners of the company. They serve as a guideline for all further activities and decisions. Another key aspect is ensuring the supply of information. Management must ensure that all relevant information is available in order to make well-founded decisions. This includes internal data on operating processes and key performance indicators as well as external information on the market and competitors. The planning of operational processes, structures and services is also a central task of management. This involves developing efficient processes and ensuring that the company's resources are used optimally. This also includes the development and provision of services or products that meet the requirements of the market. Making decisions is also crucial for management. These can be of a strategic nature, such as the development of new markets, or operational decisions, such as the daily routines in the company. Decisions must be made on the basis of available information and in the context of the company's objectives. Once decisions have been made, it is the task of management to ensure that these decisions are put into practice. This may involve delegating tasks to employees or teams and often requires the coordination of different areas of the company. Finally, reviewing and coordinating the implementation of measures is an essential part of management. This includes monitoring progress, adjusting plans if necessary and ensuring that the targets set are achieved. ➔ This is where the concept of PDDC (Planning, Deciding, Delegating, Controlling) comes into play, which encompasses the basic management functions of planning, deciding, delegating page 17 from 62 and controlling. These functions are closely interlinked and form the core of management tasks in a company. page 18 from 62  PEDK: Planning Planning levels: - Operational: short-term, many details - tactical: medium-term, medium number of details - strategic: long-term, not many details ▪ In business administration, planning is divided into three levels: operational, tactical and strategic, with each level having a different scope in terms of time and detail. Operational planning is short-term and contains many details. It focuses on daily to weekly operations and includes specific activities such as creating rosters, ordering materials or organizing daily business. For example, a facility manager could use operational planning to determine the daily shift schedules of employees. ▪ Tactical planning is oriented towards the medium term and contains a medium number of details. It serves to implement the strategic plans and focuses on periods of a few months to a year. Departmental targets, budgets and resource allocation are planned here. An example would be the planning of a marketing campaign for the coming quarter, which is aimed at increasing customer traffic in the stores of a fashion chain in a large city. ▪ Strategic planning, on the other hand, is designed for the long term and covers fewer details. It deals with the fundamental direction and development of the company over several years. In this phase, goals such as market expansion, product development or company mergers are defined. For example, as part of its strategic planning, a company might decide to expand into a new international market over the next five years. Planning aspects (aspects that must be taken into account during planning): ▪ A key factor is the definition of responsibility and the responsible persons. It must be clearly defined who is responsible for creating, implementing and monitoring the planning. This ensures that there are clear contact persons and that responsibilities do not remain unclear. ▪ Planning accuracy is also crucial. Planning should be as precise as possible in order to define realistic goals and measures. However, a balance must be struck, as planning that is too detailed can be inflexible and planning that is too coarse may overlook important details. ▪ The planning period plays an important role and depends on the company's specific goals and needs. Short-term plans focus on immediate actions, while long-term plans steer the strategic direction of the company. ▪ The complexity of planning is another important aspect. It depends on various factors, such as the size of the company, the number of people involved, the variety of products or services and the dynamics of the market. More complex plans usually require more resources and more intensive coordination. page 19 from 62  ▪ The planning reliability and the probability of occurrence of the planned measures must also be taken into account. It is important to assess the risk and uncertainty of various planning scenarios and develop corresponding contingency plans. ▪ Finally, the scope and importance of planning for the company plays a decisive role. Larger projects or those that are critical to the future of the organization require more intensive planning and resource allocation, while smaller or less critical projects can get by with less planning effort. The key is to allocate resources and efforts according to the importance of the project or plan. Planning process: In the fashion industry, as in many other industries, there are various primary approaches to planning, namely top-down, bottom-up and the counter-current method. ▪ In top-down planning, decisions and plans are developed at the highest management level and then passed down to the various divisions. An example from the fashion industry could be that the management of a fashion company decides to develop a new environmentally friendly product line. This decision is then passed on to the lower levels, which are responsible for the actual implementation, such as the selection of materials or the design of the garments. The advantage of this approach is that decisions can be made and implemented quickly. A disadvantage, however, is that the involvement and commitment of employees at lower levels may be lower, as they are less involved in the decision-making process. ▪ This contrasts with bottom-up planning, where ideas and suggestions come from employees at lower levels and are passed upwards. In a fashion company, this could mean that the designers or sales teams pick up on trends and customer feedback and develop suggestions for new collections or product adaptations, which are then evaluated and possibly implemented by management. The advantage here is that employees who are closer to the customer or to the actual product development can provide valuable insights. A disadvantage can be that decision- making and implementation can take longer, as many different opinions and ideas have to be taken into account. ▪ The countercurrent method combines both approaches. It starts with a preliminary top- down plan, which is then reviewed and adjusted at lower levels before finally going back up for final confirmation. In the fashion industry, for example, this could mean that management sets a general direction for a collection, such as a focus on sustainability, and the teams at lower levels then develop specific proposals for designs and materials, which are in turn reviewed and finalized by management. One advantage of this process is that it takes into account both the strategic direction of management and the practical insights of employees at lower levels. A potential disadvantage is that this process can be complex and time-consuming, as it involves several feedback loops. page 20 from 62 Quality criteria for planning: The planning should - be related to the company's objectives, - be realistic, - be based on economic criteria, - be consistent, - be easy to understand, precise, clear and structured, - be complete and not omit any important information, - be flexible, - be based on accurate data and information and be as up-to-date as possible; and - should be commissioned by bodies that are appropriately competent and have the relevant information. page 21 from 62  PEDK: Decision-making Being able to make decisions means having at least two options (individual, collective): who, about what, how (process), which decision-making techniques Subject of the decision: In the context of decision-making processes in companies, there are various items that need to be taken into account for effective decision-making. ▪ First of all, the question of how a decision is made is of central importance. This can, for example, take place through coordination within a team or through a decision by the management. An example of this would be when a fashion company decides which fabrics to use for the next collection. This decision could be made by the design team or by the management, depending on the company structure and decision-making policy. ▪ It is also important who is involved in the decision. This may depend on the nature of the decision. In a small company, the owner might make most decisions alone, whereas in larger companies, a board of directors or a special decision-making body might be involved. When introducing a new marketing strategy in a technology company, for example, both the marketing director and the CEO could be involved. ▪ The information required for a decision is also crucial. This includes data, analyses, reports and expert opinions that are required to assess the situation and the options. When a company is deciding whether to open a new store, it needs information about the location, the target group, the competition and financial forecasts. ▪ Finally, the decision-making process plays an important role. This process can be structured or less formal, depending on the size and culture of the company. It can include various steps, such as collecting and analyzing information, discussions, evaluating alternatives and finally the decision itself. In a fashion company, for example, the decision-making process for developing a new clothing line might involve brainstorming sessions, customer surveys and financial analysis before a decision is made. The decision-making process: 1. acknowledgement, registration, determination of the decision situation 2. collecting information and analyzing the situation 3. developing and determining options for action 4. evaluation of the alternative courses of action 5. selection of the alternative 6th decision page 22 from 62  7. monitoring the consequences of the decision for further decisions Techniques for decision making: In business administration, various techniques are used to make decisions in order to achieve the best results. ▪ A frequently used method is the SWOT analysis, in which the strengths, weaknesses, opportunities and threats of a company or project are evaluated. In the fashion industry, a company could carry out a SWOT analysis to decide whether it should introduce a new sustainable clothing line. Factors such as the company's own expertise in sustainable fashion (strengths), possible higher production costs (weaknesses), increasing customer interest in environmentally friendly products (opportunities) and strong competition (risks) would be considered. ▪ Another technique is cost-benefit analysis, in which the costs of a decision are compared with the expected benefits. For example, a fashion company might compare the cost of hiring a celebrity designer with the potential sales growth and image gain to decide whether the hire makes sense. ▪ The decision tree analysis is also a useful tool that helps to visualize different options for action and their possible consequences. A fashion company could use a decision tree to decide whether it should expand into a new market. This would take into account various scenarios such as market acceptance, competitive intensity and potential revenue. ▪ Finally, in the Delphi method, expert opinions are obtained and summarized in order to arrive at a well-founded decision. A fashion company could use this technology to obtain expert opinions on future fashion trends and make decisions about the next collection on this basis. page 23 from 62  PEDK: Delegate What should be delegated: - Less important tasks - Routine tasks - Tasks without coordination requirements - Simple tasks - Complex tasks that can only be performed by experts Important aspects of delegation for the person who is delegated a task: - Talent - Motivation - Knowledge - social competence - Performance What is required for delegation: Delegating tasks is an essential part of effective management and requires various considerations to be successful. ▪ First of all, a clear description of the task to be delegated is essential. This means that the employee must understand exactly what is expected of them. An example of this could be that a team member in a marketing department is given the task of developing and implementing a specific advertising campaign. ▪ In addition, adequate information is required to perform the task. The employee must have access to all the necessary data, background information and context in order to perform the task effectively. In the example above, this would mean that the employee needs information about the target group, budget and previous marketing strategies. ▪ The assignment of competencies is also crucial. The employee must be given the necessary authority and decision-making power to fulfill the tasks independently. This could include making decisions about the design of advertising materials or the selection of advertising channels. ▪ The provision of the necessary resources is also an important factor when delegating. This includes tangible resources such as budgets or equipment as well as intangible resources such as time or access to other employees or external partners. ▪ Finally, delegation also includes the transfer of responsibility. This means that the employee not only carries out the task themselves, but is also responsible for the outcome of the task. page 24 from 62  In our example, the team member would then be responsible for the success of the advertising campaign. ➔ Overall, effective delegation requires careful planning and communication to ensure that employees have all the necessary tools and information to perform their tasks successfully. page 25 from 62  PEDK: Control Ultimately, control means comparing the "target state" with the "actual state". How high should the degree of control be? Control as one of the main tasks in management can take various forms, each offering its own opportunities and challenges. On the one hand, there is intensive monitoring, with managers keeping a close eye on the activities and performance of their employees. This makes it possible to identify problems at an early stage and intervene quickly. This form of monitoring can be particularly helpful in critical areas or with new employees. However, too much monitoring can also have a demotivating effect and inhibit employees' creativity and initiative. On the other hand, there is a looser form of control that relies more on the trust and personal responsibility of employees. Here, employees are given more freedom to perform their tasks independently and control is limited to the results rather than the way in which these are achieved. This can increase employee motivation and satisfaction and promote their independence. The downside, however, is that problems may not be identified until late and there is a risk that employees may stray off course without sufficient guidance and guidelines. A middle level of control attempts to combine the best of both worlds. Clear goals and guidelines are set, but within which employees have a certain amount of leeway in carrying out their tasks. Regular updates and feedback sessions help to maintain an overview while promoting an open and dynamic working environment. ➔ Overall, the optimal level of control depends on various factors, such as the nature of the task, the experience of the employees, the corporate culture and the specific objectives of the company. A balanced level of control that takes into account both the needs of the company and the employees is often the key to effective management. page 26 from 62  Organizational design Organizational design in companies is a key aspect of business administration that focuses on structuring and linking different business units. Factors such as space, time, material resources and people are taken into account when designing the organizational structure. Organizational design determines the formal reporting relationships, procedures, controls, authority and decision-making processes within a company. It also determines how work should be done in line with the company's strategy. For example, it defines the communication channels and how decisions are made and implemented. The tasks of organizational design include the design of work processes and the spatial and temporal structuring of these tasks. The aim is to determine the sequence of tasks and the differentiation in terms of work content, working time, work space and work input. In a production company, this could mean arranging the machines and workstations in such a way that the production flow is optimized and employees can work efficiently. The goals of sensible organizational design are manifold. They include reducing complexity by modelling and standardizing processes, optimizing capacity utilization and reducing distribution, throughput, waiting and idle times. This leads to a reduction in transaction processing costs. At the same time, effective organizational design aims to increase the quality of working conditions and process handling. This can be achieved, for example, through ergonomic workplace design, which increases both the productivity and well-being of employees. Another important objective is to reduce the error rate in decision-making and product manufacturing and to reduce distribution and transport costs through optimized workplace design. Ultimately, an efficient organizational design also leads to an increase in adherence to delivery dates by shortening waiting and distribution times, which is particularly important in industries with tight delivery deadlines. Overall, organizational design is a key element in increasing a company's efficiency and effectiveness while creating a work environment that takes into account both the needs of the company and its employees. Tasks of organizational design 1. organization of work processes, the spatial and temporal structuring of these tasks and the sequence of tasks 2. differentiation in the order of work content, working time, work area and work assignment. Goals of organizational design: - Complexity is to be reduced through modelling and standardization - Optimization of capacity utilization - Reduction of distribution, throughput, waiting and idle times - Reducing the costs of transaction processing page 27 from 62 - Improving the quality of working conditions and process handling - Reducing the error rate in decision-making and product manufacturing - Reduction of distribution and transport costs through optimization of workplace design - Increased adherence to delivery dates by shortening waiting and distribution times Organizational charts (organizational diagrams): see example from the lecture Matrix organization A matrix organization is defined as an organizational structure in which there is dual or multiple accountability and responsibility of managers. In a matrix organization, there are usually two chains of command, one along functional lines and the other along project, product or customer lines. page 28 from 62  Performance-related functions: Procurement The task of (material) procurement is to provide and, if necessary, procure the material required for production (and the services to be rendered). It must ensure that the required material (production) factors are available: - in the right way - in the right place - at the right time - in the right quantity and in the right quality. The procurement includes: - Material analysis - Procurement market research - Decision: "produce or buy in" (outsourcing) - Selection of suppliers and materials Procurement tasks: Planning, procurement in the narrower sense, handling, storage and disposal of materials ABC analysis The ABC analysis is an analytical tool that helps those responsible for materials to separate important materials from less important ones and thus use resources as economically as possible. When procuring materials, this analysis is based on the assumption that a smaller quantity share of certain required materials can have a comparatively larger share of the total value or costs of all required materials. The materials are then sorted into A, B or C classes according to their relative share of the total value and treated accordingly. Materials M2 M6 M1 M3 M4 M5 Total Quantity/Quantity 500 300 800 400 6.000 2.500 10.500 Percentage share 5 3 8 4 57 23 100 in terms of quantity Rank in relation to 4 6 3 5 1 2 quantity Total value 60.000 42.000 32.000 24.000 18.000 12.500 188.500 Percentage share 32 22 17 13 9 7 100 in relation to value Rank re. value 1 2 3 4 5 6 Classification A B C page 29 from 62 Note: The AABC analysis can be used not only in the context of merchandise management, but basically whenever it is necessary to create groupings and divide them according to importance. For example, customers can be classified into A, B or C customers, just as requirements for employees can be classified into A, B or C groups. XYZ analysis Like the ABC analysis, the XYZ analysis can also be used to make decisions about the procurement of different types of material. However, the focus here is not on the proportion of the total value, but on the regularity of demand. X materials are in frequent demand (regardless of the purchase price), demand for Y materials is not quite as high (because these materials are subject to seasonal fluctuations, for example) and Z materials are needed irregularly, which is why their demand can hardly be predicted accurately. The ABC analysis can be combined with the XYZ analysis. For example, the combination of material types AX (i.e. the demand is easily predictable and the material value is also relatively high) leads to the recommendation of careful planning and yet procurement as close to consumption as possible. Exploration of the procurement market: Information procurement - What is the product needed for? - What properties or quality does the product have? - What alternatives are there to the product? Relevant information on how and where to procure: - Which and how many suppliers? - Where can I find a suitable offer? - What does product development look like? - What is the price level? - Which and how many customers are there on the market? - What is your own position vis-à-vis the suppliers in relation to the other customers? Procurement market research 1. systematic description of the respective situation 2. systematic recording and analysis of developments 3. derivation of forecasts page 30 from 62 → The data for procurement market research is obtained through primary and secondary surveys. In the primary survey, no data is yet available and must first be obtained through interviews, observations or first-hand experiments. The secondary survey is based on information for which basic data is already available. Determination of requirements Demand is derived from production planning. Demand can be categorized according to whether - it relates to products that are intended directly for the customer (end products) - it relates to operating and auxiliary materials - the goods are used as parts in the end products. → The end products are referred to as primary requirements and the operating and production resources as secondary requirements. → Required products are determined based on the material requirements forecast. In business administration, there are various methods for forecasting material requirements that are based on past experience and assumptions about the future. These methods are crucial for the efficient planning of resource procurement and warehousing. 1. Plan-driven planning is based on forecasts of future events and requirements. Material requirements are determined on the basis of planned projects, orders or sales forecasts. Companies look into the future and try to estimate the need for materials based on the expected course of business. An example of this would be a car manufacturer planning its production for the coming year. Based on the planned sales figures and new model series, the demand for various materials such as steel, plastics and electronic components is forecast. 2. Consumption-based planning, on the other hand, is based on past consumption patterns and uses these to estimate future material requirements. This method is based on the assumption that future demand will be similar to past demand. For example, a clothing manufacturer could analyze the consumption of fabrics and yarns from previous seasons to determine the demand for the coming season. This approach is particularly effective in stable markets with predictable patterns. Both approaches have their advantages and disadvantages. While plan-driven planning makes it possible to react proactively to expected market trends and changes, it can be less flexible in the event of unexpected market changes. Consumption-driven planning, on the other hand, benefits from a solid database of past consumption patterns, but can be prone to inaccuracies in fast-moving or rapidly changing markets. In practice, many companies combine both methods to achieve balanced and realistic material requirements planning. Outsourcing: "Make or buy" page 31 from 62 Outsourcing is a common strategy in business management in which companies outsource certain services or production steps to external service providers. The decision for or against outsourcing depends on various factors and has both advantages and disadvantages. ▪ A key advantage of outsourcing is that companies can concentrate on their core business. If certain products or services are not part of a company's core area of activity, it can be more efficient to source these from an external provider. An example of this is an IT company that outsources its building cleaning to a specialist service provider instead of employing its own cleaning team. ▪ Cost advantages can also be a decisive reason for outsourcing. When products are mass- produced, suppliers can often offer lower prices than in-house production. This is the case, for example, with standard components in the electronics industry, where specialized manufacturers can produce more cheaply due to economies of scale. ▪ Another advantage is access to specialized expertise and greater reliability. If the supplier has specialized skills that the company itself does not have, or can offer greater reliability in the supply chain, outsourcing is often the better choice. For example, a fashion company could outsource the production of special fabrics to a supplier that has the necessary technical expertise. ▪ Even if in-house production would require high investments, outsourcing can be a cost- effective alternative. Companies avoid high initial investments and can react more flexibly to market fluctuations. On the other hand, there are also disadvantages to outsourcing. ▪ One of the main disadvantages is the potential loss of control over quality and the production process. When a company outsources key components or services, it is dependent on the supplier and has less control over production standards. ▪ In addition, outsourcing can result in hidden costs, for example due to the effort involved in selecting and monitoring suppliers. ▪ Transportation and storage costs can also play a role, especially if the outsourced products or services have to be sourced from distant locations. Overall, the decision for or against outsourcing depends on various factors and should be carefully weighed up. Companies must weigh the potential cost benefits against the risks, such as loss of quality control and dependence on suppliers. Choosing the right outsourcing partner and an effective contract and supplier management strategy are critical to maximizing the benefits of outsourcing and minimizing the disadvantages. What should be considered when dealing with suppliers: Dealing with suppliers is an essential part of doing business, especially in industries such as fashion, where the quality and reliability of the supply chain directly affects product quality and customer satisfaction. One of the most important aspects of dealing with suppliers is maintaining strong and transparent communication. This includes clearly defined expectations, regular updates and open discussions page 32 from 62 about potential challenges. For example, a fashion company could hold regular meetings with its fabric suppliers to discuss upcoming trends, delivery times and quality standards. Another important component is the negotiation and drafting of contracts. Contracts should be fair and balanced and take into account the interests of both the company and the supplier. They should contain clear conditions regarding delivery times, prices, quality assurance measures and return policies. For example, a fashion label could negotiate contracts with its textile suppliers that define specific quality criteria and deadlines for delivery. Quality assurance is also a crucial aspect. Companies must ensure that the products or services provided by their suppliers meet consistent quality standards. This can be achieved through regular quality checks, product testing and site visits. In the fashion industry, for example, a retailer could send quality control teams to the factories of its clothing suppliers to ensure that the clothing meets the set standards. It is also important to build and maintain a long-term relationship with suppliers. Long-term partnerships can lead to better cooperation, trust and often more favorable terms. In the fashion industry, this could mean that a company works closely with a supplier to develop a sustainable clothing line, with both parties benefiting from the joint innovation. Finally, companies should have a risk management strategy when dealing with their suppliers. This includes the assessment and management of risks such as delivery delays, quality fluctuations or financial problems of the supplier. For example, a fashion company might have multiple suppliers for critical materials to minimize the risk of supply shortages. Overall, dealing successfully with suppliers requires a combination of good communication, careful contract design, consistent quality assurance, building long-term relationships and effective risk management. By taking these aspects into account, companies can ensure a stable, efficient and high-quality supply chain. ➔ Outlook: In the future, the Supply Chain Act will influence the relationship between companies and their suppliers. page 33 from 62  Performance-related functions: Production What is meant by production: Production is a transformation process in which raw and auxiliary materials (i.e. production factors and intermediate products) are converted into end products, often with the help of operating resources. → Products, services Production targets (depending on company targets and current company situation): → what kind of products, how many products, how to produce, where to produce, when to produce, for whom to produce → Overarching formal objectives: Economic efficiency, productivity, quality, occupational safety, environmental protection Production criteria: In business administration, various production criteria play a decisive role in the design and optimization of production processes. One of these criteria is the type of products that are manufactured, as different products may require different production methods and technologies. The number of products in a company's production program also influences the production process, as a greater variety of products generally requires more complex production and logistics processes. The number of products manufactured is another important criterion. Individual products are usually manufactured to specific customer requirements, while series products are produced in regular batch sizes. Mass products, on the other hand, are manufactured in large quantities, which often requires a high degree of standardization and automation. The degree of automation is another criterion that affects the efficiency and cost-effectiveness of production. Higher automation can lead to lower unit costs, but also requires higher initial investment and is less flexible in the event of product changes. The trigger for production, whether on order or for the warehouse, also determines the production strategy. Order-based production is triggered directly by customer requirements, while stock-based production is produced for stock to ensure rapid delivery capability. The arrangement of production is another criterion. Workshop production is used for specialized or customer-specific products, where the work steps are often spatially separated. Group production organizes production around specific product groups, while flow production is used for standardized products in large quantities, with the production stations arranged in a line. page 34 from 62 Finally, the staggering of production plays a role. Single-stage production means that the product is manufactured in a single step, while multi-stage production involves several processing steps, often in different departments or even locations. Together, these criteria influence the choice of production methods and technologies used by a company and have a direct impact on the efficiency, flexibility and costs of production. "The classic law of diminishing returns" (by Anne Robert Jacques Turgot) The law of diminishing returns (also known as the law of diminishing marginal productivity) states that in production processes, increasing one factor of production by one unit while keeping all other factors of production constant at any point in time results in a lower unit of output per additional unit of input. Example: In the classic example of the aforementioned law, a farmer who owns a certain amount of acreage finds that a certain number of workers produce the maximum yield per worker (e.g., 10 workers produce the maximum yield). If he hires more workers (say, he hires one more worker so that the total number of workers is 11), the combination of land and workers would be less efficient because the proportional increase in total output would be less than the expansion of workers (in other words: If he adds one more worker, output should increase by 10% in this example. Instead, it is very possible that output would only increase by 9% or even less). Output per worker would therefore fall. → This rule applies to every production process, unless the production technology changes, for example due to innovations in the company. Production functions: In business administration, the terms "linear or non-linear limiting production functions" and "total or partial substitution production functions" refer to different ways in which companies convert input factors into outputs. Linear or non-linear limiting production functions describe how input factors are in a fixed relationship to each other in order to achieve a certain output. In a linear limiting production function, there is a constant relationship between the inputs and the output, regardless of the quantity produced. This means that doubling all inputs results in a doubling of output. Non-linear limiting production functions, on the other hand, have a variable relationship between inputs and outputs, whereby the increase in inputs does not necessarily lead to a proportional increase in output. An example of this would be a factory in which one engine, four wheels and two seats are always required to produce a car - the relationship between the components does not change. Total or partial substitution production functions, on the other hand, describe situations in which input factors can be substituted for each other to a certain extent. With total substitution, one input can be completely replaced by another without affecting the output. Partial substitution means that one input can only be replaced by another to a certain degree. An example of this in the fashion industry would be the possibility of partially replacing cotton with synthetic fibers to produce textiles. page 35 from 62 While a certain degree of substitution is possible, it is not possible to completely dispense with one of the two materials without changing the properties of the end product. These production functions are important for business decision making as they help companies determine the most efficient combination of resources to maximize production. Costs: Fixed costs and variable costs: Variable costs are all expenses that change depending on how much a company produces and sells. This means that variable costs increase when production increases and decrease when production decreases. The most common variable costs include labor costs, supply costs, commissions and raw materials. Fixed costs, on the other hand, are all expenses that remain the same regardless of how much a company produces. These costs are usually independent of a company's specific business activities and include things like rent, property taxes, insurance and depreciation. Total costs and average costs: Total costs are all costs incurred for the production of a particular good, while average costs are the average costs per unit of goods produced. "The cost-income ratio" The cost/income ratio is one of the efficiency ratios used to assess the efficiency of an organization. It is used to compare a company's operating expenses with its income. The lower the cost-income ratio, the better the overall performance of the company. If the ratio is higher compared to the previous year, the company is not as efficient as in the previous year. If the ratio is high compared to other companies in the same sector, the company is not performing as well as these other companies. → Cost-income ratio = operating costs : operating income In terms of the cost-income ratio, however, the context is ultimately important, i.e. the "why" behind the key figure. Example: Let's imagine a fashion company that produces and sells high-quality clothing. In 2023, the company's operating costs amounted to 500,000 euros, while operating income was 1,000,000 euros. To calculate the cost-income ratio, we divide the operating costs by the operating income: 500,000 euros divided by 1,000,000 euros results in a cost-income ratio of 0.5. This means that the company spends 50 cents for every euro it earns, which indicates a relatively high level of efficiency. Let us now assume that in the previous year, i.e. 2022, operating costs amounted to 400,000 euros and operating income also amounted to 1,000,000 euros. This would have given the company a cost- income ratio of 0.4 in 2022, which means that it would have spent only 40 cents for every euro it earned. The increase in the cost-income ratio from 0.4 to 0.5 in 2023 indicates that the company was less efficient compared to the previous year. If we compare this fashion company with other companies in the same industry, we might find that most other fashion companies have a cost-to-income ratio of around 0.3. This would suggest that our page 36 from 62 fashion company is less efficient compared to others in the industry, as it has higher costs in relation to its revenue. In this context, it is important to understand why the cost-income ratio has increased. Perhaps the company has invested in new technologies or expansion into new markets, which could lead to higher costs in the short term but higher profits in the long term. This "why" behind the ratio is critical to fully assess the financial health and long-term prospects of the company. page 37 from 62  Performance-related functions: Marketing What is the "market"? 1. the place where buyer and seller meet. 2. the place where the competition can be found. The relevant "markets": 1. procurement market 2. sales market (this is generally meant when "the market" is mentioned) Marketing criteria: → what is being sold → who is a member of the market → why is something bought → how something is bought → when is something bought → who influences the purchase decision → where to buy something Main tasks of marketing: - Market research - Product policy - Pricing policy - Communication policy - Sales policy marketing process: - Market and environmental analysis (what, who, why, how, when, where) - Definition of marketing objectives - Defining the marketing strategy - Use of marketing instruments - Controlling & management of marketing instruments page 38 from 62 Customer relationship: The management of customer relationships is referred to as customer relationship management (CRM). - Finding the right customer - Finding information about the right customer - Customer approach - Convince the customer of the offer - The sale - Service after the sale - Staying in contact with the customer Possible marketing objectives: - Increase in sales or turnover (in figures / in monetary amounts) / market share - Increasing the level of awareness (company/products) - Improvement of the image (company/product) - Development of new sales areas Market research: → Why is market research important? 8 steps to a better market research project: - Identify the problem - Formulation of the objective for the market research project - Specification of the research questions - Creation of the research design - Implementation of the data collection - Evaluation of the data - Interpretation of the result - Using the result to solve the problem Methods of market research: Qualitative market research: when individual cases or phenomena are investigated and it is not primarily a question of numerical relationships (e.g. interview). page 39 from 62 Quantitative market research: when primarily the totality of cases or mass phenomena is investigated and the focus is primarily on numerically representable relationships (e.g. interview). The four "P's" in marketing: The marketing mix, consisting of the famous "4Ps", is an established concept that describes the essential components of a successful marketing strategy. In the fashion industry, these four elements are applied in a variety of ways. 1. First of all, it is about the product, i.e. the product policy. The focus here is on the design of the product range. For example, a fashion company could specialize in the production of eco- fashion in order to differentiate itself on the market and meet customer demand for sustainable clothing. 2. The second point is the price, the pricing policy, which deals with the price at which products and services are offered. A luxury fashion label might set high prices to emphasize the exclusivity and quality of its fashion and target a more affluent audience. 3. Place, the distribution policy, determines the channels through which products are made available to customers. A fashion retailer could choose a combination of physical boutiques in prime shopping locations and an online store to appeal to a wide audience and offer customers a seamless shopping experience. 4. Finally, promotion, or communication policy, is concerned with the way in which products and brands are communicated in order to generate awareness and increase demand. An example of this could be an advertising campaign on social media that a fashion company uses to promote its latest collection and enter into a dialog with customers at the same time. ➔ Together, these "4Ps" form a framework within which fashion companies can position their products and brands and effectively serve the needs and wishes of their target customers. Product policy: → Product policy is the design of the product range in terms of type and quantity according to the interests, wishes and needs of customers. → Breadth of range (number of different products or product categories)/ depth of range (variants of products or product types) Product life cycle: 1. introduction of the product 2. growth of the product 3. maturity of the product 4. product saturation 5. return of the product 6. termination of the product page 40 from 62 Product policy measures: Product policy measures are a central component of corporate strategy and can be implemented in various ways to increase market share and promote growth. The first measure is market penetration, also known as a conquest strategy, in which a company attempts to increase sales of existing products in existing markets. This can be achieved, for example, by intensifying advertising, price promotions or improvements in customer service. An electronics manufacturer could try to increase sales of its latest smartphones to consumers through strong advertising campaigns or discount offers. Product development or the substitution strategy involves the creation of new products or the improvement of existing products in order to better penetrate existing markets or open up new ones. An example of this would be a software company developing a new version of its word processing program to meet the changing needs of its users. As part of their market development or internationalization strategy, companies expand their activities into new markets. For example, a sportswear manufacturer might decide to launch its products on the Asian market in order to benefit from the growing middle class there. Diversification or the expansion strategy is the process of adding new products to the product portfolio that are either related or completely unrelated to the current products. An example of this would be a car manufacturer expanding into the renewable energy sector and producing solar panels. Keeping a product on the market is another important product policy measure, especially if the product continues to perform well and meet customer needs. A food company might decide to continue selling its classic muesli brand as long as it continues to generate stable sales. Product changes can take the form of product variation or product differentiation. Variation would be when a coffee manufacturer introduces a new flavor, while differentiation could occur when the same manufacturer offers different blends specifically for espresso drinkers or for fully automatic coffee machine users. Diversification can be horizontal, vertical or lateral. Horizontal means that similar products are added, such as when a furniture manufacturer starts selling home décor items. Vertical diversification could mean that a clothing manufacturer starts producing fabrics as well, while lateral diversification occurs when a company introduces completely new products that have nothing to do with its previous offering. Finally, product development is a process in which new products are developed to stimulate growth or respond to changing market conditions. An example of this could be a cosmetics company developing a new skincare line for sensitive skin. The removal of a product from the market, also known as product elimination, is a decision that can be made when a product no longer meets the company's objectives or is no longer competitive in the market. This may be the case when a clothing manufacturer realizes that a certain line is no longer in vogue and is therefore discontinued. page 41 from 62 Each of these product policy measures requires careful consideration and can have a significant impact on a company's success. They require a thorough analysis of the market, customer needs and the company's internal capabilities. Analysis of the product portfolio: → Recommendations for product policy measures (Boston Consulting Group: depending on market share/market growth of the respective product): - Cash cows: Cash cows have a high relative market share in a slow-growing or static market. They produce stable, high cash flows and can be "milked" without further investment. A fixed price or price competition strategy is appropriate. - Stars: The Stars are the company's most promising products. They have a high relative market share in a growing market. They already cover the investment requirements resulting from market growth from their own cash flow. The strategy recommendation is to invest in further market growth and possibly a skimming strategy in order to increase the contribution margin without jeopardizing the market share. - Poor dogs: The poor dogs are the discontinued products in the company. They have low market growth, sometimes even a market decline, as well as a low relative market share. These products should be removed from the portfolio (divestment strategy) as soon as the contribution margin for these products is negative. - Question mark: The question marks are regularly the newcomers among the products. The market for these products has growth potential, but the products only have a small relative market share. The management is faced with the decision of whether to invest or abandon the product. In the case of an investment, the product requires liquid funds that it does not generate itself. A typical strategy recommendation is an offensive penetration strategy to increase market share if the company is prepared to invest the necessary funds. Communication & customer acquisition: sender-receiver model The sender-receiver model is a basic communication model that describes the process of transferring information from one person to another. In this model, the sender is the person who wants to communicate a message. The sender encodes their thoughts or information into a message, which is then sent to the recipient via a suitable channel. This channel can take many forms: spoken words, written text, electronic communication or even non-verbal means such as gestures and facial expressions. As soon as the message reaches the recipient, it is decoded, i.e. interpreted and understood. The receiver can then respond to the received message by giving feedback back to the sender, creating a dialog and making the communication circular. The model shows that communication is a two-way process and emphasizes the importance of feedback for the understanding and effectiveness of communication. However, it also points to possible sources of interference that can distort the message on its way from the sender to the page 42 from 62 receiver. This interference, often referred to as noise, can occur at various levels, whether through misunderstanding, the choice of an inappropriate channel or external influences that interfere with the transmission of the message. Essentially, the sender-receiver model is a framework for understanding the communication process, highlighting the importance of clarity, effective channels and feedback for successful communication. Difference between marketing and advertising Marketing and advertising are both essential elements in the business process, especially in the fashion industry, but they serve different purposes and encompass different activities. Marketing is the broader discipline; it is a business philosophy and a collective term for all activities aimed at bringing products or services from the company to the customer. It is not just about fulfilling needs, but also anticipating and shaping them. In the fashion industry, this means anticipating or setting trends, designing collections based on customer preferences and ensuring that these collections are distributed through the right channels. Advertising, on the other hand, is a specific function within marketing that aims to draw attention to certain products or services and positively influence the attitudes of target groups. In the fashion industry, advertising could mean running a series of ads for a new collection aimed at rejuvenating the brand's image or emphasizing the uniqueness of the design. For example, if a fashion company decides to make sustainable practices a central aspect of its corporate philosophy (marketing), it might launch an advertising campaign highlighting the use of organic cotton in its latest collection (advertising). While marketing involves strategic direction and planning, advertising is the execution that turns that strategy into measurable results. The two are closely linked and work together to achieve the company's overall goals. Advertising: Advertising means informing the addressees (customers, suppliers, dealers, cooperation partners) specifically about the company's products and services. → Advertising has the task of (positively) changing attitudes towards the offers and the company among the selected target persons and target groups in the sense of the tasks (generating demand, changing image, anchoring unique selling points, etc.) → AIDA: attention, interest, desire, action Questions that need to be clarified before starting an advertising campaign: - What should be advertised? - Who is the target audience? - What is the aim of the advertising? - What is the message of the advertising? - How should the advertising be done? - When, how long and how often should the advertising take place? - In which media should the advertising take place? page 43 from 62  - Who should carry out the advertising? - What financial resources are available? Sales promotion → for customers → for dealers → for sales representatives Direct marketing → direct personal contact Sponsoring → Promotion or support Public relations → Creation of a good corporate image → For example, through press conferences, newspaper articles, annual reports, organization of events page 44 from 62  Sales policy Types of distribution channels In business administration, a distinction is made between direct and indirect sales channels, each of which has its own advantages and disadvantages. Direct sales occur when a company sells its products or services directly to the end customer without using intermediaries. A significant advantage of this channel is the complete control over the customer experience and brand presentation. For example, fashion companies that sell directly through their own stores or an online store can ensure a consistent brand image and receive direct feedback from their customers. However, direct sales often require significant investment in setting up and maintaining the sales infrastructure and can be particularly challenging for smaller companies. In contrast, with indirect distribution, companies use external dealers or distribution partners to market and sell their products. One advantage of this approach is the greater reach and utilization of the existing distribution networks and expertise of intermediaries. For example, a fashion company could distribute its clothing through independent boutiques or large retailers to reach a wider customer base without having to invest in additional stores. However, this can lead to less control over brand representation and potentially lower margins as the intermediaries apply their own mark- up to the products. The choice between direct and indirect sales channels depends on many factors, such as the brand strategy, the company's resources and the preferences of the target customers. While direct distribution enables a closer relationship with the customer, indirect distribution can help to quickly achieve economies of scale and make the products accessible to a wider range of buyers. Each strategy requires careful consideration of the respective advantages and disadvantages with regard to the company's specific objectives. ➔ Criteria: Customer contact, number of customers reached, costs, profit margin, dependencies, sales management, organization, core competencies of the manufacturer ➔ Relevant factors in practice: product characteristics, customer characteristics, characteristics of your own company, characteristics of independent dealers, competitive conditions Commercial agents, dealers, franchisees A sales representative, an authorized dealer and a franchisee are players in the sales process who sell a company's products or services to customers, but their roles, responsibilities and the nature of their relationship with the company differ. A commercial agent is a self-employed trader who is commissioned to broker business for one or more companies or to conclude transactions on their behalf. He acts as a link between the company and the customers, but does not become the owner of the goods he sells. Instead, he receives a commission based on the value of the transactions concluded. A key feature of commercial agents is their legal and economic independence, which allows them to work for competing companies. page 45 from 62 In contrast, an authorized dealer is also independent, but is usually tied exclusively to one company. He buys products from this company, becomes the owner of the goods and sells them on to end customers. An authorized dealer often benefits from the manufacturer's strong brand, but also bears the risk of selling and stocking the goods. A franchisee operates their business under the name and business model of the franchisor and sells the franchisor's products or services. Under a franchise agreement, the franchisee uses the franchisor's brand, know-how and system, but usually has to pay a franchise fee. The franchisee follows the franchisor's specifications and standards very closely, which ensures a high level of consistency in the customer experience across different locations. The activities of a commercial agent, authorized dealer and franchisee overlap in their core function of selling products or services to end customers. However, they differ in the type of relationship with the company, the degree of autonomy and the scope of the risks assumed. The advantages for commercial agents lie in their flexibility and independence, while authorized dealers can benefit from exclusivity. Franchisees, on the other hand, benefit from a proven business model and receive comprehensive support. On the other hand, commercial agents bear the risk of variable commission, authorized dealers bear the risk of warehousing and franchisees bear the risk of ongoing franchise fees as well as potential restrictions on their entrepreneurial freedom. ➔ Each of these models requires a thorough consideration of the respective advantages and disadvantages with regard to the individual business objectives and framework conditions. ➔ Commercial agents are usually self-employed and broker business for a company. He does not buy any products from the company, which is why the sales contract is concluded directly between the company and the customer. The commercial agent earns a commission through his brokerage activities. ➔ The retailer is also independent and buys the products directly from the company and sells them to customers. He earns from the margin between the purchase and sales price. ➔ A franchise is usually a dealer system in which the franchisee receives the entire system described and prepared by the franchisor. The franchisee can then concentrate on sales. However, deviations from the procedures, processes and operations described in the franchise system are usually difficult to make. Logistics: In the field of logistics, planning, optimizing, executing and controlling the transportation of items involves a series of steps aimed at maximizing efficiency and effectiveness. Planning begins with determining the need for transportation resources, defining delivery routes and creating schedules that are tailored to the needs of customers and the company's capacities. The aim is to organize the movement of goods in such a way that they reach their destination on time, cost- effectively and safely. During optimization, processes are analysed and adapted to make transport as efficient as possible. This can include bundling shipments to avoid empty runs or selecting the optimal route to shorten distances. Technological aids such as transport management systems can help here by processing complex data and offering solutions for route planning and vehicle utilization. page 46 from 62 The execution of transportation is the implementation of the planned processes. It is important to load the goods on time, transport them safely and unload them at the destination on schedule. Problems such as traffic delays, technical breakdowns or unforeseen weather conditions must be resolved quickly in order to meet delivery times. Control is a continuous process that ensures that transportation activities proceed as planned. This includes tracking the shipments, monitoring the means of transportation and checking the quality of the delivered goods. Any deviations that occur must be analyzed and corrected in order to ensure continuous improvement of the transport process. Various factors should be taken into account when choosing the means of transportation. These include the type and volume of items to be transported, the distance and geographical conditions of the route, the cost, the availability of the means of transportation and the environmental impact. For example, air transport may be the best choice for fast deliveries over long distances, while road transport is preferred for local deliveries due to its flexibility and the possibility of door-to-door delivery. Rail can also be a cost-effective alternative for heavy or bulky goods over medium to long distances. ➔ The choice of transport mode has a direct impact on the cost, duration and environmental impact of transportation, which is why careful consideration of these aspects is essential. page 47 from 62  Human resources/ personnel management The subject of personnel management is all personnel-related operational measures. The primary aim of personnel management is to make the production factor of labor available to the company in the best possible way in order to achieve the company's goals. The staff consists of all employees, workers and managers, or simply put: all people who belong to the company and are employed there. The departments and positions responsible for personnel management are referred to as Human Resources (HR). In Germany, there are