Business Economics PDF - DADE-C

DADE-C BUSINESS ECONOMICS ESPADAS PUYET, MARÍA CUNEF UNIVERSIDAD TABLE OF CONTENTS UNIT 1 – THE FIRM.................................................................................................................................................... 3 1.1 THE NATURE OF THE...

DADE-C BUSINESS ECONOMICS ESPADAS PUYET, MARÍA CUNEF UNIVERSIDAD TABLE OF CONTENTS UNIT 1 – THE FIRM.................................................................................................................................................... 3 1.1 THE NATURE OF THE FIRM................................................................................................................................................ 3 1.2 TYPES OF FIRMS............................................................................................................................................................. 4 1.3 OWNERSHIP AND MANAGEMENT....................................................................................................................................... 5 1.4 ENTREPRENEURSHIP........................................................................................................................................................ 5 UNIT 2 – THEORICAL APPROACHES TO MANAGEMENT.............................................................................................. 2 2.1 CLASSICAL APPROACH...................................................................................................................................................... 2 2.2 BEHAVIORAL APPROACH................................................................................................................................................... 1 2.3 QUANTITATIVE APPROACH................................................................................................................................................ 2 2.4 CONTEMPORARY APPROACHES.......................................................................................................................................... 2 UNIT 3 – BUSINESS ENVIRONMENT........................................................................................................................... 3 3.1 GENERAL ENVIRONMENT.................................................................................................................................................. 3 3.2 COMPETITIVE ENVIRONMENT............................................................................................................................................ 3 3.3 ORGANIZATIONAL CULTURE.............................................................................................................................................. 4 UNIT 4 - INFORMATION AND DECISION MAKING....................................................................................................... 2 4.1 INFORMATION AND DATA................................................................................................................................................. 2 4.2 DECISION MAKING.......................................................................................................................................................... 2 4.3 DECISION MAKING APPROACHES........................................................................................................................................ 4 4.4 INFORMATION SYSTEM AND MANAGEMENT......................................................................................................................... 5 UNIT 5 - BUSINESS MANAGEMENT............................................................................................................................ 6 5.1 BUSINESS ADMINISTRATORS AND MANAGERS....................................................................................................................... 6 5.2 THE NATURE OF THE MANAGER’S JOB................................................................................................................................. 6 5.3 MANAGEMENT FUCTIONS................................................................................................................................................. 8 planning...................................................................................................................................................................... 8 organIzing................................................................................................................................................................... 9 leading......................................................................................................................................................................10 controlling.................................................................................................................................................................14 5.4 LEADERSHIP.................................................................................................................................................................14 UNIT 6: OBJECTIVES AND GROWTH OF THE FIRM.................................................................................................... 16 6.1 ECONOMIC GOAL AND VALUE CREATION............................................................................................................................16 6.2 SOCIAL RESPONSIBILITY, SUSTAINABILITY, AND ETHICS..........................................................................................17 6.3 THE GROWTH OF THE FIRM.............................................................................................................................................18 6.4 INNOVATION...............................................................................................................................................................20  UNIT 1 – THE FIRM 1.1 THE NATURE OF THE FIRM An organization is a deliberate arrangement of people to accomplish some specific purpose. CHARACTERISTICS OF ORGANIZATIONS - Distinct purpose (seeks to accomplish certain goals) - People (social entity composed by people) - Deliberate structure (tasks and responsibilities are divided among the organization members) A firm is a profit-seeking organization that provides goods or services designed to satisfy customers’ needs by transforming lower-value inputs into higher-value outputs. Firms are affected by the environment in which they operate. All firms are organizations but not all organizations are firms. FUNCTIONS The firm as an economic reality creates value by transforming inputs (raw materials, resources) into outputs (goods and services) The firm as a social reality creates value for its stakeholders (customers, employees, competitors, etc.) A firm’s activities can be assessed from economic and social points of view when it comes to job creation, wealth generation, and income distribution in a region or country. A disproportionate level of inequality in income (unemployment): - Reduces the level of social cohesion. - Increases social conflict. - Hinders the potential for economic growth. THEORETICAL APPROACHES TO THE FIRM NEOCLASSICAL THEORY - The firm is seen as a “black box” that transforms inputs into outputs for sale in the market, and the goal of the firm is to maximize profit. - The theory believes markets will be restored naturally. - Prices and wages will adjust on their own in response to changes in consumer demand. TRANSACTION COST THEORY Bounded rationality: human decision-making - There are costs involved in carrying out a market transaction: process in which we attempt to satisfy, information costs, negotiation costs, monitoring costs and rather than optimize. enforcing a contract. - The existence of transaction costs is due to human factors Opportunism: taking opps. as they appear (bounded rationality and opportunism) and contextual regardless of planning. factors (uncertainty) - The make-or-buy decision depends upon the relative transaction costs. These depend upon asset specificity, uncertainty and the frequency of the transaction. Make when TC are high and buy when TC are low. o ­ asset specify/uncertainty/frequency - ­ TC – make. AGENCY THEORY - In the agency theory, the firm is seen as a nexus of contracts. - A principal hires an agent to act on his behalf. The interests of the principal and agent differ. - For the efficient functioning of the firm, an incentive mechanism is needed to reduce the opportunistic behavior of the agent and align the interests of the principal and the agent. - Conflicting objectives and uncertainty originate from information asymmetry and opportunistic behavior. - Agency costs: oversight costs, guarantee costs and residual loss costs - The focus of the theory is to get optimal contracts to govern principal-agent relationships and minimize agency costs. RESOURCE-BASED VIEW OF THE FIRM (RBV) - A firm is seen as a unique bundle of resources and capabilities. - The firm’s ability to accede and use these resources effectively gives rise to competitive advantage. - Firm resources can lead to sustained competitive advantage if they are valuable, rare, difficult to imitate and non-sustainable. 1.2 TYPES OF FIRMS There are different criteria for classifying firms: Ownership of capital o Private-owned firms (Banco Sabadell) o State-owned firms (RTVE) o Mixed equity firms (Red Eléctrica de España) Nature of the productive activity o Industrial firms: extractive and manufacturing firms (REPSOL) o Commercial firms: wholesale companies, retail companies and commission agents (Makro, Mango, Idealista) o Service firms: educational firms, transport firms, communication firms, etc. (Renfe, EF, Prisa) Scope (where they perform their activities) o Local o Domestic o International Legal form o Sole proprietorship (owned by one person) o Partnership (owned by 2 or more people to do business and share profits) o Corporation (stands separate from its owners) o Cooperative (association of individuals formed to provide services to its members) Size BALANCE TYPE EMPLOYEES TURNOVER SHEET Micro