Ae 24 Strategic Business Analysis PDF

**AE 24** **Chapter Introduction** **[Strategic business]** analysis involves the thorough evaluation of all facets of enterprise operations that starts with a good foothold in the knowledge and application of basic principles of economics, human resource management, production and operations mana...

**AE 24** **Chapter Introduction** **[Strategic business]** analysis involves the thorough evaluation of all facets of enterprise operations that starts with a good foothold in the knowledge and application of basic principles of economics, human resource management, production and operations management, marketing management, as well as financial management to aid in decision-making, **[Economic analysis]** allows business managers to compare the different types of needs, goods, resources, and the outcomes from combining those resources in the larger view of local and global economic activities. **[Human resource management]** underscores the process of developing a job analysis as a requisite for the creation of a human resource management plan. Meanwhile, **[knowledge of production and operations management]** will clarify the processes involved in answering the questions of *what, how, and for whom to produce*. The production and operations management areas of planning and control, materials management, inventory management, and project and supply chain management are important to appreciate to ably apply them when one conducts strategic business analysis. **[Economic activities]** are further fueled by marketing initiatives. Marketing management allows for the movement of goods from production to consumption side and creates other economic activities in between. Finally, **[financial management]** puts the valuation of economic activities in place. This is the area where costs are accounted for, and where receipts are reconciled with expenses to determine the financial viability and sustainability of a business enterprise. This chapter explains the important ideas, theories, and concepts in business management to aid any business manager to craft a strategic business plan. **LESSON 1 -- ECONOMIC PRINCIPLES** *[Lesson Introduction ]* **[ECONOMICS]** - is the study of how to manage money and the financial status of an individual, an enterprise, an organization, or a country. - Managing a household or an organization requires different skills that will come handy in regular day-to-day transactions one may have. - At the core of economics studies are concepts such as **scarcity**, **unlimited needs and wants, alternatives**, **choice**, and **foregone benefits**. - In a more business-like scenario, is the economic aspect of budgeting and financial management. - Learning **how to invest, how to spend, and how to save money** are other critical aspects of economic understanding. - Classified into **two branches**, **[microeconomics and macroeconomics]**, the principles and concepts apply similarly but different in scope. - The former only deals with **individuals, households,** and **specific companies**. - The latter deals with the **society as whole** and its **dynamic relationship with the rest of the world**. - This lesson will provide the perspective of **integrating economic knowhow in business analysis approach** and in the **strategy development of a business organization.** *[Lesson Presentation]* **[Economic issues]** - permeate society in various ways. **[Economic principles and concepts ]** - can be found in everyday dynamics, from large scale activities such **as movements in the stock market,** **government directives on poverty and health care**, and **multi-nation involvement in trade**, to as simple as ***fluctuations in the market price of basic commodities***. **[Critical and complex economic issues]** - ***impact the lives of ordinary people in the same way that they affect businesses.*** - To better understand the interplay of economic factors in both household and business situations, it is best to first appreciate some basic economic ideas. - - - - - - - **[Scarcity of resources]** - leads one to explore the **economics of things**. - Scarcity should [not be confused with shortage. ] - It refers to the [existence of limited resources that are not enough to address unlimited human needs or demands.] **[Shortage]** - refers to a market occurrence whereby the **demand is more than the supply available at a given time.** - Therefore, properly allocating these resources according to a larger vision and direction of individuals, households, companies, and international communities becomes more critical. - Satisfying the needs and wants of various entities are the driving force of all economic activities and eventually defines the prospective prosperity of individuals, companies, and communities. - **[Rationalization]** - allows one to evaluate the value of the goods being obtained based on the cost that must be expended for its exchange. When an individual finally makes a purchase, it comes because of carefully evaluating the intrinsic and extrinsic value of the good in question and only pays for it if it is worth its price. [**Scarcity of resources** ] - evolves into the identification of alternatives and a decision for trade-off. - - - - - - - - - - - **[Primary Needs]** - are those that are **essential for one\'s survival**, these are resources that an **individual cannot live without**. - Food is clearly an example of a need, just as shelter that is at the barest of minimum is. **[Secondary Needs]** - are those that are directly associated **with one\'s happiness**, or a **person\'s elevated status in society**. - These secondary needs are what we refer to as **[wants]**. - However, under normal circumstances, *condominium living* in a posh development area is already *considered as a want.* **[Goods and services]** - are created with fixed and variable inputs. - - - - The principle of **[reduced usefulness]** or **[diminishing marginal utility]** - - - - - - **[Economic activities]** - refer to production, distribution, and consumption of goods and services. - The goods that go around these economic activities are classified as to either tangible or intangible. - The former are goods with physical identity, while the latter refers to services. - Using this definition, **economic activity** would refer [to the movement of both goods and services in a production, consumption, and distribution process to satisfy human needs and wants]. - The [magnitude, type, and extent of resource] involvement [*differ* in every economic activity]. - are motivated by either [directly or indirectly] satisfying human needs and motivations. - This is the reason why human needs and wants are identified as the fundamental cause of any economic activity. - However, the way an economic activity is chosen to satisfy the same type of need or want differs from one individual to another. - Varying individual resources, priorities, situations, motivations, preferences, and level of satisfaction dictate the multiple ways by which needs and wants are met. **[Economic Resource]** - is a means by which an individual\'s needs and wants may be directly or indirectly satisfied. - For example, a cup of rice is an economic resource as it provides the food requirement of an individual, just as a rice plantation is an economic resource because it provides the rice requirement of a community or a company. - A teacher is an economic resource for those with teaching and learning needs, just as a lawyer is an economic resource for those requiring legal services. - There are many different examples of economic resources that can be found in everyday settings, and these resources differ in category depending on the nature or level of scarcity, form, or renewability. - - - - - are those goods that [indirectly satisfy] human needs and wants. - Example would be gasoline, which is needed to fuel a car to be able to provide a means of transport. - Depending on how it was used, the same resource can be *[classified both as **consumption and capital goods.** ]* - The distinction lies on how the good was used and not on its inherent character. - A cup of rice can be categorized as ***consumption*** good when it is *[purchased and consumed as it is]*. - It becomes a ***capital good*** when it is *[used as an ingredient to create another food]* product or obtained for a different purpose such as producing a rice wine. - Based on **[nature or level of scarcity]**, **economic resources** are *[either scarce or free]*. - - - - Renewable resources such as watersheds and forests are regenerative and sustainable although this can usually happen only over a long period of time. - - - can also be classified according to their physical form, and are either **natural**, man-made capital or human. - What exists in nature such as **land and bodies of water are [natural resources].** **[Man-made or capital resources]** - are those goods that were produced by men from combining natural resources and were created for an identified purpose. **[Human resources]** - come in the form of labor services such as a doctor, a writer, or a fisherman. - - - - - - - - - - - - **LESSON 2** **HUMAN RESOURCE MANAGEMENT BASICX** [*Lesson Introduction* ] **[Human resources management ]** - involves the [monitoring of the culture of the organization], and is responsible for the recruitment of appropriate workforce, in the recommendation of market-based compensation and benefits that are in accordance with the company\'s current and potential resources and in the crafting of an overall strategic employee development plan. - It is also the **management function** that [conducts research and makes policies and recommendations], which *are implemented to benefit, attract, and retain the best employees*. **[HRM Five Functional Areas]** 1. **[Organizational Design]** - is about ensuring that there is an **employee-job fit for all the positions** in an organization to fulfill its mission. - This is done through the corollary functions of planning and job analysis. 2. **[Staffing]** - Staffing deals with the **recruitment of individuals** whose *skills, abilities, knowledge, and experiences are deemed appropriate for the job*s in the organization that needs to be filled. - Corollary functions to staffing are recruitment and selection. 3. **[Rewards, Benefits, And Compensation System]** - Then there is the design of rewards, benefits, and compensation system that includes compliance, rewards based on job evaluation, and direct and indirect employee benefits and compensation. - Its compliance component includes the legal aspects of human resource management. 4. **[Training And Development ]** - Employee and organizational training and development seek to ensure that employees have the necessary knowledge and skills that will allow them to satisfactorily perform their jobs and steer the company toward its advancement in its sector. 5. **[Performance Management And Appraisal System]** - Performance management and appraisal uses performance evaluation tools developed or adopted by the organization to help identify interventions to enhance work efficiency. *[Lesson Presentation]* - - **[Core Of Human Resource Management]** - is the **[attraction, placing, rewarding, training, and retention]** of the right people *according to the objectives of the organization*. **[Job Analysis]** - outlines the human resource management plan. - Job analysis is the *process of collecting and studying various factors that are related to the operation and responsibilities* of a specific job. - Its immediate products are job description and job specification. - **Job analysis** is [required] in human resource *planning, recruitment and selection, training and development, job evaluation and performance appraisal,* the creation of a compensation and rewards system, and the establishment of health and safety policies. **[Job description]** - contains the *job title, location, summary of duties, machines, tools, equipment needed to perform the job,* and materials and forms that will be used to perform the job, including the supervision that is expected to be given or received, as well as working conditions and possible risks. **[Job specification]** - on the other hand, contains the statement of manpower qualification for a specific job. - This includes the required minimum education, experience, training, judgment, initiative, physical effort, skills, responsibilities, communication level, and emotional and social characteristics. **[Designing organizational structures]** - also considers efficient work process and dynamics. - This being said, due consideration is given not only to the daily processes but more so to the organization\'s priority areas that are more often *accomplished over a longer period*. - Understanding the efficiency of all systems and programs marks the beginning of the analysis on how to better improve results and outcomes. - Additionally, [human resource management] emphasizes *accountability in the design of structures and systems* that involves people and resources. - As such, a *[level of independence and clear standards must be established at the onset]*, to ensure that processes will run smoothly and with the least disturbance or delays. Ensuring the efficient managerial function of ***planning, organizing, directing, and controlling*** are within the context of designing organizational structures. 1. - pertains to formulating ***[strategies of personnel programs]*** ahead of use and will contribute to overall organizational goals. 2. - is an essential *[**process of allocation of tasks** amongst members]* of a specific structure, with identified relationships, responsibilities, and accountabilities within an integrated activity toward the [achievement of a common goal]. 3. - is a function that *[**allows for the activation** of people at various levels of skills and tasks]*, and ensures that each one is able to maximize his or her contribution to organizational goals. - Given appropriate motivation and reward, directing employees at different levels becomes possible even with the slightest exercise of authority. 4. - comes after planning, organizing, and directing, and necessitates the review of the employees\' actual performance. - It also includes verifying deviations and comparing results from identified plans and offering corrective actions for improvement. - - - - - - **[Staffing]** - comes after job analysis and human resource planning. It includes *[recruitment, selection, placement, and orientation]*. - **[Recruitment]** - is the ***process of searching for prospective employees*** and providing an encouraging environment for them to pursue their job application in the organization. - - - **[Selection] -** is the **process of determining the qualifications knowledge, skills, attitude, experiences, and values** of an applicant with the purpose of ascertaining job suitability. - - - **[Placement]** - - - - - No description available. **Placement to Work Performance Flow** **[Human resource management]** - - - - - - - - **[Training and development]** - - - - - - - - - - **[Performance management and appraisal]** - - - - - - - - - - - - *[Lesson Review]* **[Human resource management]**, - - - - - - - **LESSON 3** **Production and Operations Management Basics** [*Lesson Introduction* ] \- A **product** or **service** is the primary object of consumer interest in a market. \- **Production and Operation Management** focuses on **converting the raw materials into finished goods or services.** \- It involves **production planning, supply chain management, project management,** and **inventory management** to meet the consumer demands. **TRANSFORMATION PROCESS IN PRODUCTION** 1. **Place Utility -** Moving products to where they are needed. 2. **Time Utility -** Storing inputs and outputs for future use. 3. **Form Utility -** Changing the physical form of inputs. 4. **Service Utility -** Providing services directly or indirectly 5. **Knowledge Utility -** Sharing information through advertisements. **KEY AREAS OF PRODUCTION MANAGEMENT** 1. **Production Planning and Development** 2. **Production Administration** 3. **Implementation Function** 4. **Standardization and Simplifications** 5. **Specialization** 6. **Quality Control** 7. **Research and Development** **Production System -** Deals with the **functions of converting inputs to outputs** using processes, on demand forecasting, and on manufacturing control. **Production Process -** Refers to manufacturing activities **that result in either semi-finished product, finished product, or a by-product**. **Operation Process -**Refer to activities that result in the availability of a complete service or an allied service. **Production and Operation Management -** Is the application of the management functions of planning, organizing, directing, and controlling in the process of manufacturing goods or in the provision of a service. **Organization -** Are designed mainly to produce products or services. **Production -** Is about the creation of all goods and services, regardless of type or kind. **Operation -** Refer to any process that accepts inputs and uses resources to change those inputs in useful ways. **- Both Production Management and Operation Management** plays a vital role in an organization in increasing efficiency and productivity. **Operation Management -** Is focused upon administrations, planning, and execution of operations involved in production of goods and services and trying to minimize the resources, at the same time increasing output. Operation Management is more concerned with input/output and churning out products in the shape of desired finished product. **Production Management -** Deals with planning, control, and decision making necessary for carrying out the productions process. \- Defined as the design, operation, and improvement of the systems that create and deliver the firm's primary products and services. **Twin Issue Production and Operation Management** 1. **Effectiveness -** Refers to goal achievement 2. **Efficiency -** Related to the cost resource utilization involved in the production and operation activity. **KEY ELEMENTS OF PRODUCTION AND OPERATION MANAGEMENT** **System -** Provides an efficient and effective framework of activities necessary to attain an objective. **Element -** Consists of men, materials, machines, process, and information network designed and located to interact harmoniously. **Right Quality** **-** Based upon the customer's need. \- The right quality is not necessarily the best quality \- It is determined by the cost of the product and technical characteristics as suited to the specific requirements. **Right Quantity** **-** Emphasizing that the manufacturing organization should produce the products in the right number. \- If they produced more than demand, the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products. **Right Time** **-** Also an important parameter to judge the effectiveness of a production department, which must aim to make the optimal utilization of inputs resources to achieve its objective. **Right Manufacturing Cost** **-** Must be established before the product manufactured. **Location of Facilities** **-** To find the optimal location that will result in the greatest advantage to the organization. **Layout Decisions** **-** Include the capacity of the organization to make substantial investment in money and effort, its commitment to maintain the facility, and a full evaluation of cost efficiency to the operations.  **Productivity** **-** Is the aim in production and operation management. \- The efficient combination of land, labor, capital, and management to optimally produce goods and services determines the level of operational productivity. **Product Design** **-** Deals with the conversion of ideas into reality, and every business organization mist design, develop, and introduce new products as a survival and growth strategy. \- Developing the new products and launching them in the market is the biggest challenge faced by the organizations. \- Is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. \- The important decision in process design are to analyze the workflow for converting raw materials into finished product and to select the workstation for each included in the workflow. **Production Processes** **-** Can be classified in three categories: 1. 2. 3. **Flow Production** **-** Also referred to as mass production, denotes a production process that runs in sequence. \- This type of production process is suitable for high demand goods, where a steady flow of raw materials used in the manufacturing system before the final product is brought out of the manufacturing facility. **Batch Production** **-** Divides prodcution output in component parts. \- The whole production process is divided in parts, with the unfinished product in the form of various finished parts. \- Is applicable for a product that uses different machines and tools depending on the part to create. **Unit Production** **-** Happens when productions is made according to when the customer specifically requires it. \- This type of production is best used for products that do not require repetitive steps, nor has high demand. **Production Planning and Control** **-** About implementing plans in terms of job schedule, machine appropriation, and actual workflows. \- As a management tool, controls need not be elaborate and complex but simple enough yet able to create an efficient operation of optimal production at the least cost. **Project management** \- Evolved from Henry Gantt\'s famous Gantt chart and Henri Fayol\'s Five Management Functions of planning, organizing, commanding, coordinating, and controlling. -A project is an organized initiative that has a concept phase, a project initiation phase, planning, execution, monitoring and control, and a project closure. While it may appear to be overwhelming to an inexperienced individual, project management systems are meant to simplify and break down milestones for time and resource use efficiency. -A good knowledge of project management presupposes an appreciation of work integration, scope, time, cost, quality, procurement, human resource needs, communication and its channels, risk, and stakeholder management. **Supply chain managemen**t \- Is the management of a network of business activities and processes that includes procurement, manufacturing, transportation of finished goods, warehousing, distribution, and inventory management. \- With a global business scenario, the expanse of supply chain management is magnified and characterized by geographically distinct markets, by diversely obtained raw materials, by more efficient manufacturing and procurement processes elsewhere, and by cheaper labor markets abroad. \- Supply chain management involves a broad function that sees planning, design, control, and implementation of processes related to procurement, manufacturing, distribution, and sales functions of an enterprise. \- The network of service providers of the supply chain process, called vendors, are efficiently coordinated and integrated by supply chain managers to ensure that production and distribution and all other activities in between will not be vulnerable to the risks of distance and time. \- Not to be confused with simple logistics, supply chain management goes beyond the management of the flow of goods as it also deals with securing and exchanging information, data, and documents between transacting parties. \- Logistics acts as the post-procurement function of delivering raw materials from the source to the production plant, and the transportation of finished goods from the production to the various points of distribution. **Warehouse management** \- Completes the logistics process in ensuring the security and safety of goods, finished or unfinished, at any stage of raw materials procurement, production, and distribution. \- Normally outsourced, or performed by a third party, the value of warehousing activities and companies would be in the extent of their reach and multi-location presence, especially when one speaks of global production and distribution. **Production and operations management** \- Is continuously influenced by an ever-changing global environment and must therefore adjust to the challenges, trends, and developments in this area. \- Adaptation to the global context, in entering in supply chain partnerships, in just-in-time performance and real-time monitoring, to mass production and customization, to bespoke trends, and rapid product development and high valued and diverse workforce, production and operations management will remain a dynamic area that is worthy of focus in doing strategic business analysis.