Business Management PDF

BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES NATURE OF BUSINESS PROFITS Business as commerce Dividends: giv...

BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES NATURE OF BUSINESS PROFITS Business as commerce Dividends: giving profit back to ○ Producing exchanging and owner trading goods and services Retained profit: retained earnings, for a profit in public and NPO is called surplus Business as an occupation ○ Net profit before taxes ○ Acquired set of special ○ Net profit: after taxes skills and abilities Religious organizations cannot ○ Allows people to create provide dividends, as they have no valuable goods + services, profit then sell at a profit Business as an organization RESOURCE INPUTS ○ Decision-making organization in the process HUMAN of using inputs to produce Quality and quantity of people goods or provide services required to make a product or Meet the needs and wants of provide a service individuals or organizations All businesses require human input through: Some businesses require many ○ Producing crops individuals, often with different ○ Extracting raw materials skillsets ○ Creating a product PHYSICAL ○ Providing a service Quality and quantity of materials, Business may focus on one activity machinery, and land space or engage in multiple activities required to make product or Some businesses engage in service completely different activities Online businesses still require All businesses input resources and space and electronic gadgets process them to generate an FINANCIAL output Quantity of cash and other forms of ○ Business adds value to finance required to make the inputs (called added value) product or service Businesses gain revenue (sales) ENTERPRISE and/or recognition for satisfying a Business idea and determination want or need Required to turn the idea into a All organizations must have functioning, thriving business human, physical and financial Also known as entrepreneurship resources and are considered Exists in all businesses businesses Businesses provide for needs and/or wants PRODUCTION PROCESSES ○ Needs: for survival CAPITAL-INTENSIVE Food, water, Large proportion of land/machinery clothing, shelter Sometimes land/machinery has ○ Wants proprietary or special qualities Not essential for LABOUR-INTENSIVE survival but desired Large proportion of labor relative to for by the market other inputs Human, Physical, Financial, Can involve low-skilled workers or Enterprise -> Production -> Goods highly skilled employees & Services 1 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES PRODUCT OUTPUTS PRODUCTION PROCESS GOODS INPUT Tangible products Raw materials, components, Consumer: straight to consumers machinery, equipment, labor Capital: produces other goods PROCESSES SERVICES Turning input into manufactured Intangible goods or services Karate class, medical examination, OUTPUTS international delivery of a package Provision of final goods or services Retail sales: retailer provides service of having array of products for consumers to purchase BUSINESS SECTORS PRIMARY (GOODS) BUSINESS FUNCTIONS Acquisition of raw materials Extraction, mining, farming, fishing, Smaller businesses deal with the hunting, trapping functions themselves, larger Closely government-monitored due businesses hire specialized to scarce resources and/or managers to carry them out potential to damage environments HUMAN RESOURCES SECONDARY (GOODS) Appropriate people are employed Processing of raw materials to make the product/service and Manufacturing are compensated accordingly Consumer durables, non-durable Recruit people, train them, dismiss consumer goods, capital goods them and determine appropriate Initially occurred in developed compensation counties (19th-20th centuries) FINANCE AND ACCOUNTS 1970s: manufacturing firms based Ensure that appropriate funds are themselves in developing countries available to make the product or and emerging markets service TERTIARY (SERVICES) Forecast requirements, keep Provision of services, sometimes records, procure resources, ensure using manufactured products proper payment for goods and Financial, leisure, healthcare, services acquired education, transport, security, MARKETING retail/wholesale, consultancy Ensure that business offers a Important in developed countries product or service that is desired QUATERNARY (SERVICES) by a sufficient number of people or Subgroup of tertiary sector businesses for profitable Focused on knowledge operations E-services– IT, media, web-based Use appropriate strategies to services, education, researchers promote price, package and Post-industrial economies distribute the product or services Businesses in the developed world OPERATIONS MANAGEMENT Ensure that appropriate processes PRODUCTION CHAIN are used to make the product/service Steps through different sectors that Control quantity and flow of stock, occur in order to turn raw materials determine appropriate methods of into a consumer good production, look for ways to Raw materials are processed into produce good or service more products which are shipped and efficiently sold, and eventually repaired 2 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES SECTORAL CHANGE REASONS TO START Size of each economy sector may REWARDS change as individuals or Unlike being employed, you get to businesses grow and develop keep all rewards to yourself Measured in terms of the number Those who put their capital at risk of people employed by the get the rewards industries in that sector Those who do not put their capital As economies develop, social at risk receive wages or salaries technologies do as well– this leads INDEPENDENCE to a transition from primary to You are your own boss and you secondary to tertiary sectors get to make your own rules Developed economies move away No feeling of being constrained by from the primary sector, with bosses, policies, and procedures in exceptions large organizations ○ Canada: organic farming Set and change the policies and ○ Australia: wine production procedures as you see fit ○ Germany: engineering NECESSITY Strains Individuals whose positions were ○ Higher need for human made redundant or could not find resources as more work advanced sectors require Necessity to have an income more skilled people CHALLENGE ○ Financial resources To see if they can “make it” diverted from one sector to themselves another Small businesses typically require ○ Tertiary and quaternary one person to perform all functions sectors require fewer Business owner learns new skills physical resources as his or her role changes to ○ Shift to secondary sector: accommodate a larger and more weak legislation and complex operation protection against INTEREST environmental damage Passion for something who wants Manufacturing in to keep doing what they enjoy developing doing countries does more Specialty stores allow owners to damage to the work in an area for which they environment than in have a passion developed economies FINDING A GAP Discovery of untapped opportunity “First-mover advantage” GLOBALIZATION SHARING AN IDEA Companies do not pay taxes for Belief in something, wanting to sell services rendered abroad the idea to others Those employed abroad do not Motivation is to spread their idea pay taxes in home countries Causes a culture change 3 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES PROCESS PLANNING THE BUSINESS Write a business plan addressing BUSINESS IDEA all the issues that need to be Concept forming the basis of a planned before operations begin venture ○ Of use to owners and Fundamental activity that the financial institutions business will do providing capital Market driven: Determined by the ESTABLISHING LEGAL REQUIREMENTS needs of the market Laws influence the legal Service driven: Entrepreneur or organization of the business, its business convinces others that the labor practices, operational product/service is worth buying practices, and tax obligations Market: People with same needs Businesses must be registered Target market: Specific group of ○ Sole traders are not legally consumers likely to purchase separate entities from the product business Value proposition: Compelling Businesses must be established in reason making a product attractive accordance with the laws of the Brand equity: Brand reputation and host country value Must have specific licenses or ORGANIZING THE BASICS pass certain inspections before Location of the business they can operate Business name Can be extensive and costly Legal structure Tax requirements Operational structure ○ Income tax, payroll tax Whether there is sufficient ○ Employee pension from business infrastructure to make it government, feasible unemployment and ○ Suppliers, potential sickness benefits, medical customers, government insurance services RAISING THE FINANCE MARKET RESEARCH Get business started and support Refining the business idea business until it can sustain How the business will distinguish operations from profits itself from others in the market Accounting and auditing Gaps in market are rarely obvious procedures of the business ○ New businesses have high May come from entrepreneur or failure rights; US rates are other investors 50-80% in first 4 years and ○ Equity capital: person is 25% in first year alone partial owner of business Consider how market research will ○ Investment: selling shares be conducted ○ Capital may also be loans Who the target market is TESTING THE MARKET If the business test the concept Business launch: pilot or not Unique selling proposition Expensive, especially for How business will communicate capital-intensive manufacturing with the market Verify that the business idea will be Consider if market has too many received well enough by competitors or if a segment is consumers to suggest that the saturated business has a reasonable chance of success 4 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES FEASIBILITY VS VIABILITY Feasible ○ The possibility to create and sell product ○ Whether it is practical even with constraints Viability ○ Sustainability in long run ○ Whether it can achieve intended outcome in terms of profitability or sustainability CHALLENGES FACED BY NEW BUSINESSES ORGANIZATION Inappropriate business location Structure did not work Supplies were unreliable MARKET RESEARCH The market research was poor Target market wasn’t appropriate Test was too optimistic Weak channels of communication BUSINESS PLAN Unconvincing Vague and contradictory goals LEGAL REQUIREMENTS Labor laws were not addressed Difficult registration Unaddressed tax obligations FINANCE Accounts were not kept properly Cash flow was a problem Raising start-up capital was difficult Raising medium-term to long-term finance was difficult THE MARKET The launch failed Pilot was inconclusive Success was limited 5 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES ○ Liable for all the debts of the business or other BUSINESS ENTITIES claims PRIVATE VS PUBLIC ○ Unlimited liability Private Limited finance ○ Managed by individuals ○ May come from personal and companies not owned savings of sole trader or a by the government loan ○ Usually for-profit ○ Personal savings may be ○ Profit = revenues - costs limited ○ Family, friends, banks, Public other financial institutions ○ Owned and controlled by may be reluctant to lend the the government sole trader money due to ○ Main goal is to provide high failure rate of start ups public services and Geographically close to customers protection to citizens ○ Usually small business that ○ Surplus = revenues - costs allows sole trader to ○ Funded by tax revenue, interact with each customer trading surplus ○ Provide more personalized ○ Loss-making services can services than larger be kept operating if the businesses social benefit is great Privacy and limited accountability ○ Inefficient ○ Do not have to declare No profit targets finances to anyone except Government tax authorities subsidies ○ May have to disclose encourage financial statements to inefficiency lenders or lessors Politics and Registering is easy, inexpensive, government quick interference ○ Less legal paperwork to fill No competition = no out and file reason to innovate ○ Make all decisions PROFIT-BASED ORGANIZATIONS themselves Exist to generate profit Do not have to ○ Public, NPO: surplus devote time to Sole traders, partnerships, discussion and privately and publicly held building consensus companies or corporations Advantages SOLE TRADER ○ Complete control Sole trader owns and runs the ○ Flexibility in working hours, business products and services, and ○ May employ other people operational changes ○ Make management ○ Privacy decisions ○ Minimal legal formalities ○ Have ultimate responsibility ○ Close ties to customers for the business No legal distinction between the business and sole trader ○ Sole trader is the business 6 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES Disadvantages Greater degree of accountability ○ Challenging to compete ○ Deed of partnership against established Legally binding businesses document that sets ○ Stress and potential out the rights and ineffectiveness duties of the ○ Lack of continuity partners ○ Limited scope for Responsibilities, expansion financing, division of ○ Limited capital profits, liabilities, ○ Unlimited liability procedures for PARTNERSHIPS changing Formed by two or more people circumstances Friends, associates, people with ○ Partners know their rights similar or related skills and responsibilities Decisions are made jointly by More stable, higher continuity partners ○ Long term organization ○ May employ other people Do not necessarily share all profits ○ Partners make all equally management decisions ○ Allocated and paid out ○ Each partner has according to partner’s percentage ownership percentage ownership Business is owned and managed ○ More finance provided = by more than one person greater proportion of profits ○ Between 2 to 20 Advantages No legal distinction between ○ Efficient production due to business and partners specialization and division ○ Partners are liable for all of of labor the partnership’s debts and ○ More expertise obligations ○ Greater stability and lower ○ Partners have unlimited risk, more access to liability finance Can be called upon ○ More continuity to pay for 100% of Disadvantages partnership’s debts ○ Unlimited liability: partners Finance is more available are legally responsible for ○ All partners contribute all business debts or capital to start up (buy into) actions of other partners the business ○ Less access to loans from ○ Banks and financial financial institutions as institutions are more willing compared to a company to provide finance to a ○ Individual partner does not partnership than to a sole have complete control trader ○ Profits must be shared Sleeping partners ○ Partners may disagree ○ Provide some finance and COMPANIES/CORPORATIONS expect a share of the profit Limited liability company Offer more varied service than sole Business and owners of trader businesses are legally separated ○ Different partners have Liability of company is distinct from different expertise the liability of owners ○ Product or service offerings Legal existence in its own right can vary 7 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES Multiple owners: each own a Disadvantages fraction in the company in shares ○ Takes time and money to ○ Do not necessarily run the set up due to legal business requirements Executives manage business and ○ Selling shares does not workers handle day-to-day guarantee that intended operations amount of finance will be Must obey laws and pay taxes raised Legally recorded details of ○ Owners risk partial or entire company’s formation loss of control ○ Memorandum of ○ Loss of privacy association ○ No control over stock Records key market characteristics and ○ Limited control over who external activities of buys shares company being SHAREHOLDERS created Advantages ○ Articles of association ○ Price of shares may Specifies how increase in value if company will be company is performing well regulated internally ○ Company issues a portion Greater finance is available of the company profits as Companies keep profits from dividends activities ○ Limited liability, only liable ○ Owners may decide to pay for investment all or a portion of profits to Disadvantages shareholders (dividends) ○ Price of shares may Shareholders receive proportion of decrease in value if profits as dividends company is not performing ○ Determined by proportion well of shares of stock ○ Company may choose not ○ At discretion of company to issue dividends if there is Individual shareholders do not no need to control the business unless they ○ Individual shareholders own a majority of shares may not have any High degree of accountability meaningful say in decisions ○ Companies provide about the business information to shareholders ○ Published, audited, annual company reports ○ Annual general meeting ○ Extraordinary general meet High continuity Advantages ○ More finance available ○ Limited liability for investors ○ Continuity ○ Possibilities for expansion ○ Established organizational structure 8 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES PRIVATELY HELD COMPANY High degree of collaboration Incorporated business with limited between business and local liability to owners community Owner’s liability is limited to their ○ Both recognize a need investment in the company being met Shareholders cannot sell shares More democratic unless they have first been offered ○ Transparent and to existing shareholders consultative Shares must be transferred Operates the same functions as privately and all existing any other business shareholders must agree Advantages Shares cannot be traded on a ○ Favorable legal status stock exchange ○ Strong communal identity Limited amount of finance but ○ Stakeholder community more control is maintained benefits greatly No requirement to disclose and Disadvantages report financial statements and the ○ Complex decision-making like ○ Insufficient capital for PUBLICLY HELD COMPANY growth Incorporated business with limited ○ Insufficient capital for liability to the owners financial strength Owner’s liability is limited to their COOPERATIVES (FPSE) investment in the company Business is owned and run by all Shares of company are traded on members (typically many) public exchanges Profit is not the priority Can secure large sums of capital Sells/offers products or services at Publicly held companies must as close to cost price as possible disclose or make public ○ Lowers cost to members considerable information If prices are too low, cooperative ○ Audited financial has risk of failure if information ○ They do not reinvest in the Board of directors is appointed at business an annual meeting ○ Not updating products or ○ Represent shareholders services ○ Appoint CEO and president ○ Not having a significant FOR-PROFIT SOCIAL ENTERPRISE financial cushion Social purpose Financial ○ Improve human, social, ○ Financial institution with environmental well being ethical and social aims Social aim takes priority over ○ Lending money at lower growth, maximizing sales, or rates of interest or making profits providing non-lending Still aim to make profits without services at lower cost compromising social purpose ○ Provide loans to members Can be in private sector or public who otherwise might not be Aim to make profit, but maximizing able to borrow money profit is not the main aim Housing Social aims take precedence ○ Provide housing for ○ Profits are needed to members ensure business survival ○ Profits are reinvested in the and growth housing and operation ○ Enough profits to sustain Costs are lower the business 9 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES Workers cooperative ○ Foster informed ○ Business owned and discussions about operated by the workers allocation of resources ○ Wages of managers and ○ Can innovate workers are similar Disadvantages ○ Priority is providing ○ Intense lobbying can employment disrupt other important ○ Often emerges when causes businesses are about to fail ○ Illegal activity carried out to Workers take over campaign for the cause the business, sack ○ Irregular funding or reduce pay of Non-governmental organizations managers, reinvest ○ Support a socially desirable profits in the cause business ○ Concerned with either Producer cooperative single or broader issues ○ Groups of producers ○ May or may not have a collaborate in certain political affiliation or agenda production stages ○ Not organized or run by any ○ Common in agriculture government ○ Maximize utilization of a ○ Not exempt from taxes piece of equipment Charities individual members could ○ Provide relief for those in not otherwise afford need, philanthropy ○ Cost efficiencies can be ○ Single-event (natural achieved when a stage of disasters or wars) or production is carried out on focusing on a single issue a large scale ○ May have no interest in Consumer cooperative politics or strong political ○ Provides a service to ties consumers who are part ○ Can be affiliated with owners of the business particular religious ○ Consumers become preferences members which entitles ○ Not run by any government them to purchase goods or ○ Exempt from paying taxes services at lower prices PUBLIC PRIVATE PARTNERSHIPS NON-PROFIT SOCIAL ENTERPRISE Government-funded Do not aim to make profit at all ○ Privately managed for Generate surpluses, not profits controlled costs and ○ Advances social purpose efficiency instead of being distributed Private-sector Donations are important ○ Large project financed ○ Cannot rely on government privately to reduce funding or the like government spending ○ Endowments Private-sector-managed: cut Unclear ownership and control wages and benefits, large business ○ Compensation issues earn large profits from taxpayers, especially in large private sector may lack experience organizations Private sector makes profits, Advantages government spends less ○ Help people and causes in need ○ Fosters philanthropic spirit BUSINESS OBJECTIVES 10 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES DEFINITION ○ Based on reality and ideas Overall goals, purpose, mission of AIMS AND OBJECTIVES, a business STRATEGIES AND TACTICS Established by management and Aims: long-term communicated to employees ○ Summarized by vision Long-range intentions for operating Objectives: medium and short-term Overall business philosophy ○ Summarized by mission Useful guidance for employees OBJECTIVES Helps businesses stay focused, Strategic allocate time, money, resources ○ Global objectives VISION STATEMENT ○ Medium-long term Forward-looking, long-term aims ○ Set by senior managers to What do we want? guide company in right What the business would like to direction and achieve aims see itself as ○ Entrepreneur or CEO has Inspires and motivates employees fair and measurable way to Gives external stakeholders a assess performance sense of shared beliefs ○ Specific: clear, concrete Expresses business’ core values ○ Measurable: can be tracked Should never change and evaluated Goals ○ Achievable: realistic and ○ What company wants to attainable achieve in general ○ Relevant: worthwhile, ○ Achievable, tangible matches other objectives ○ Long-term and unspecific ○ Time-based: Actionable ○ Uses imagination and within a defined period creativity Tactical MISSION STATEMENT ○ Medium-short term More specific than vision ○ Set by middle managers to Why are we doing what we are achieve strategic objectives doing? Operational Based upon current state of the ○ Day-to-day business ○ Set by managers and What needs to be done in order to workers to reach tactical achieve the vision objectives Means for accountability, defines Ethical key performance indicators ○ Moral principles Measures how successful ○ Treat workers, customers, business is at achieving vision shareholders, and May change to meet new environment responsibly circumstances ○ Apply ethical values to Includes customers, products or targets and actions services, markets, technology, ○ Helps build customer concern for survival/growth/ loyalty, create a positive profitability, philosophy, image, create a positive self-concept, public image, and work environment, reduce employees legal redress risk, meet Objectives customer expectations for ○ Specific, measurable goals ethical behavior, increase ○ Achievable in near future profits ○ Helps achieve goals ○ Costs may rise in the ○ Detailed and specific short-term and employees ○ Concrete may resist change 11 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES ○ Competitors may respond ○ Economic change in order to maintain market ○ Ethical change position ○ Political change ○ Suppliers have to respond ○ Legal change in order to protect their ○ Ecological change orders CORPORATE SOCIAL RESPONSIBILITY ○ Customers are likely to Concern and commitment of a trust business more and company towards the sustainability develop brand loyalty and development of society ○ Improved relationship with Ethical behavior local community Philanthropy, generous salaries, ○ Government lauding ethical meaningful benefits, doing more objectives due to pressure for the environment from other stakeholders BUSINESS STRATEGY SWOT ANALYSIS Plan to achieve strategic objective that works towards the aims of the DEFINITION business Business analysis technique Medium to long-term identifying the strengths and Senior managers make decisions weakness of an organization and approved by owners, CEO the opportunities and threats in the Careful analysis of business Developing a plan to get to where market the business wants to be Assess the strategic position of a Consideration on how to business and its environment implement the strategy ○ Helps the business know Periodic evaluation process to where it stands determine whether the plan is AIMS working or has worked Help decision makers share and BUSINESS TACTIC compare ideas Plan to achieve tactical objective Work towards business strategies Bring clearer common purpose and Short-term understanding of factors for Middle managers make decisions success approved by senior managers Organize important factors linked Easier to change to success and failure in the Less closely tied to long-term business world health of company Analyze issues that have led to Focus on achieving measurable targets within strategy failure in the past NEED TO CHANGE OBJECTIVES Provide linearity to the decision Change in internal environment making process ○ Leadership change ○ Human resources ○ Organization change ○ Product change ○ Finance change ○ Operation change Change in external environment STRATEGIC ENVIRONMENTS ○ Social changes Internal ○ Technological changes 12 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES ○ Man, Money, Machine, Opportunity in an environmental Material, Method, Market condition in your macro or industry (6MS) environments that can improve ○ Strengths and Weaknesses your organizations competitive ○ Affected by External factors position relative to competitors External Rapid market growth ○ Political, Economic, Social, Weak competition Technological, Changing customer needs/tastes Environmental, Legal New uses for product discovered (PESTEL) Economic boom ○ Opportunities and Threats Government deregulation STRENGTHS THREATS Capabilities of an organization that External elements in the give it an advantage over others environment that could cause Abundant financial resources trouble for the business Well known brand name External factors beyond an Lower cost organization’s control which could Product/service efficiency place their mission or operation at Marketing skills risk Good distribution Entry of new competitors Committed employees Introduction of new products or WEAKNESSES product substitutes Factors which do not meet the Decline in usage of product standards we feel they should Changing consumer needs/tastes Must be minimized and eliminated Competitor adopts new strategy Limited financial resources Increased government regulation Weak spending on Research and Economic downturn Product Development HOW TO CONDUCT Poor products (out of date, narrow Perform PESTEL and 6Ms line up) Analyze internal and external Limited distribution environment Higher cost Perform SWOT analysis and Weak marketing image document Under-trained employees Action plan OPPORTUNITIES WHO NEEDS SWOT 13 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES Management Strengths-Threats ○ Examining and identifying Eliminate threats by focusing on fresh targets, markets and business strengths opportunities Not looking for new market ○ Evaluating the potential of a opportunities but defusing the new product or offering threats to focus on core strengths ○ Need to improve Neutral and medium-short term performance on the current DEFENSIVE STRATEGIES business operations Weaknesses-Threats Business Unit Adopted when business is most ○ Examine why targets are vulnerable not met Act defensively and quickly ○ Find how to improve Negative short-term strategies customer service necessary to help business survive ○ Launch a new product or pursue a new business ANSOFF MATRIX Company ○ When revenue and DEFINITION Growth potential of business in expense targets are not terms of market and product being achieved Considers existing markets and ○ Market share is declining products ○ External environmental conditions are proving Existing New unfavorable Product Product Existing Market Product TOWS ANALYSIS Market Penetration Development DEFINITION New Market Diversification Pairing key factors from each Market Development quadrant and adopting relevant strategies GROWTH STRATEGIES MARKET PENETRATION Strengths-Opportunities Business increases market share Combine strength with market Sells more of existing products in opportunities the same market Positive short-term strategies Safest option for growth To be pursued when it is confident Opportunities may be limited by that there are no big issues in any competitors other area Promote brand loyalty RE-ORIENTATION STRATEGIES ○ Encourage repeat Weaknesses-Opportunities customers Address weaknesses to use them ○ Lure customers away from for available opportunities competition Positive and long-term Growth potential of market Address weaknesses then Strength of customer loyalty re-orientate itself Power and ability of competitors DEFUSING STRATEGIES 14 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES MARKET DEVELOPMENT STAKEHOLDERS Looks for new markets or new market segments in the existing DEFINITION market Stakeholder Riskier as business may not ○ Any individual group or understand new markets groups of individuals who Effective market research have an interest in a Have local knowledge on ground business’ actions because Effective distribution channels they are affected ○ Can be an organization, PRODUCT DEVELOPMENT Develop new products for existing business units, market departments, groups, or Upgrades of existing products or individuals variations on existing products ○ Can be directly financial Risky, depends on how loyal stake or the community in customers are to the original which a business operates products Market stakeholders Effective market research ○ Have commercial Strong research and development relationship with the system business First-mover advantage ○ Customers, suppliers, lenders DIVERSIFICATION Riskiest growth strategy Non-market stakeholders Lack of familiarity and experience ○ No commercial relationship in the new market with the business The fact that the new product is ○ Media or community untested Primary stakeholders Effective market research ○ Directly affected by or are Due diligence: determine affecting the business attractiveness of market and cost Secondary stakeholders of entering market ○ Indirect relationship with Recognition of the existing the business business Internal and external stakeholders Possible tie-ups with other have gray areas business with necessary expertise ○ Employees live in the community where a business is located; internal stakeholders as employees and external stakeholders as residents Individuals may have multiple stakeholder interests ○ Employees who own shares 15 BUSINESS MANAGEMENT International Baccalaureate Diploma Program ELIZA CONSUELO HERRERA BELLONES, SOUTHVILLE INTERNATIONAL SCHOOL AND COLLEGES INTERNAL STAKEHOLDERS STAKEHOLDER CONFLICT Individuals or groups working Groups with common interests within the business may have differences of opinion Shareholders focus on returns on Any decision will elicit different their investments reactions from different CEO focuses on coordinating the stakeholders business strategy and focuses on Smaller businesses have relatively delivering profits and returns to uncomplicated stakeholder interest satisfy the shareholders management Managers/Supervisors focus on ○ Main requirement is to objectives assigned to them remain profitable, provide towards achieving organizational income, comply with laws goals and objectives regulations and community Employees and unions focus on standards protecting their rights and working Larger businesses have more of a conditions challenge coordinating stakeholder EXTERNAL STAKEHOLDERS interests Outside the business STAKEHOLDER ANALYSIS Customers and consumers focus Identify and analyze stakeholders on the best product or service affected by proposed action Suppliers focus on maintaining a Specify who supports, resists or is beneficial relationship between neutral to the decision themselves and firm Low High Financiers/Creditors focus on Interest Interest returns of investments and loans Government focus on the conduct Low Power Minimal Keep of the business within the business Effort Informed environment High Power Keep Key People in the local community Satisfied Players focuses on the impact of business Minimal Effort in the various aspects of the ○ Minimal interest in business locality and limited power Pressure Groups focus on how ○ Devote limited energy and business has impact on the areas attention to their interests of concern Keep Informed Media focuses on impact of the ○ Make group feel included business ○ Convey a sense of Competitors are considered belonging stakeholders as they affect and are Keep Satisfied affected by the operation of a ○ Power to influence others business ○ Flatter self-esteem Key Players ○ Consult for all major decisions ○ Focus on needs and preferences 16