Business Economics 2 PDF

Business economics Topic 1 : The firm 1 1.: Nature of the. firm organizations : a deliberate arrangement of people to accomplish some specific purpose. Characteristics of an...

Business economics Topic 1 : The firm 1 1.: Nature of the. firm organizations : a deliberate arrangement of people to accomplish some specific purpose. Characteristics of an organization : · Distinct Purpose : An organization Seeks to accomplish certain goals. · people : An organization is a social entity composed of people. · Deliberate Structure : Tasks are divided and responsibility for their performance is assigned to orsinization members.  firm : A profit-seeking orsinization that provides goods or services designed , to needs satisfy customers by transforming lower-balve inputs into higher value outputs * firms are affected by the environment , in whichtheoperatea - of the firm Markets work efficiently. Black box : That rancforms inputs into outputs. Goods and services) for sale in the market , and the goal of the firm is to maximize Profit. > - they do not explain what goes inside the black boy > - the firm is concerned about the factors and products markets in which operates. * Invisible hand = view of the Market that achives the coordination of supply and demand throught Price information The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. A supply curve is a graph that shows how a change in the price of a good or service affects the quantity a seller supplies. The invisible hand is a metaphor for the unseen forces that move the free market economy. Through individual self-interest and freedom of production and consumption, the best interests of society, as a whole, are fulfilled. The constant interplay of individual pressures on market supply and demand causes the natural movement of prices and the flow of trade. Transaction Costs theory (montoral *Firms exist because they are transaction costs. - The firm and theMarket are two Mechanisms For governing transactions. > - Thes are costs involved in out Market carrying a transaction. (information costs) (cost involved in nesotations) -markets do not work efficiently Agency theory Chief Chief financial a Officer in ↑ ~ - Chief operation  connection / link between Asenos => theor firms : Nexus things, of contracts among varies Parties > - These contracts , defines the roles and responsibility Of the principal agents. Agency relationship : A principal hires an agent to act on his behalf => for the efficient functioning of the firm the Parties must invest resources , resulting in agency costs , to reduce opportunistic, behavior of the asent and align the interest of the Principal agent. · It focus is to optimize contract to govern Principal-asent relationships andhinimize agency casts ·  Resource based theory (RBV) · A firm is seen as a unique bundle of resources and Capabilities - The firm's ability to access and use these resources effect tirely gives rise to competitive advantage - firm resources can lead to sustained Competitive advantage if they valuable , rare , difficult to are imitate and , non substitutable ~ According to the RBV , the firm Should retain in-house those functions that are the Source of competitive advantage.  Resources funding services I I Machiners Share holders /Equity holders End Inventors stock Subsidies/grants Employers f Plants ET Patents (derechos decutors ↑ JE ↑ LE - - spendersBanks savers & Market nancial 7 exsoverments They can not request more mones to banks Exi Investment Telefonica So thes seek investors 5%. G 100f A 53 gam - Invester 13m 5 % 25m 6 % 3 The 7% · until 900m investors P Types of Firms/classification ofFirms Ownership ofCapital : Privately owned Firms State , owned firms , Mixed equity firms · Size : Micro-enterprises , small enterprises , medium-sized enterprises, large companies - Turn over : Amount Sales of Balance Sheet : Financial statement that provides a Snapchat of a company financial position if includes , assets , liabilities, share holders equity. She : Small and medium size enterprises  Nature of the productivity activity Industrial firms : extractive Firms and Manufacturing firms (transformation from Van Material into Finished goods Commercial Firms! Wholesale Companies , retail companies and commission agents. * Mercadona is fully retail Company because , it does not produce. It uses third Parties Service Firms : Personal firms , transportation Firms , hotel and catering firms , Communication Firms Media , firms. Scope/scografical scope : where they perform their activities : local , domestic and , international Legal form : depends on the country : Sole proprietorship , Partnership, Corporation. Cooperation Firm owner ! A Person or people to whom the firm belongs Family owned Firm : owned by one or several families who control desition making firm owner as entrepreneur : The person who owns the Firms creates and manages the firm. firm Owner as an investor : The people who own the firm hire someone to Manage the firm on their behalf, * There is a relationship between the size and use whether the owner performs management functions within them , * Large Companies in which Capital is Provided by many owners or shareholders : A Separation between ownership and Management occurs. Corporate Governance : Mechanism to prevent and Potential Conflicts of interests between owners and managers. Entrepreneur : A Person who undertakes innovative actions , Creates a new enterprise , identifies and exploits new business opportunities (especially if it involves risk. Entrapreneur : A person who implements innovative Projects within an existing company. Main kes words of a entrepreneur : Risk taker and innovation Types of entrepreneur Innovator entrepreneur : innovates discover evaluates. Exploits business opportunities· Control entrepreneur : Coordinates factor of Production Manager. Capitalist entrepreneurs :Owner Manages risks * Better to learn from success than from Mistakes  ↑ Business Plan : Written document that summarizes a business opportunity and articulates how the identified opportunity is to be seized and exploited. First Step Setting fir up the Choice of a legal form ! Number of Partners, amount of initial shared Capital , Legal procedure : Name , registration in the Commercial resister , licenses and permits