Chapter 2 Business Administration PDF

The basic principles and nature of business administration. chapter (2(part II business quality, SWOT analysis, Resources and Accountability Chapter 2  Learning outcome (1) cont., 1.3 Understand business quality, vision, mission and SWOT analysis techniques. 1.4 Describe the human and oth...

The basic principles and nature of business administration. chapter (2(part II business quality, SWOT analysis, Resources and Accountability Chapter 2  Learning outcome (1) cont., 1.3 Understand business quality, vision, mission and SWOT analysis techniques. 1.4 Describe the human and other resources required by a business, and relate the resources to corporate objectives. 1.5 Identify the needs and accountabilities of different stakeholders in a business and how their behavior might affect the business. What is quality ⚫ In general, achieving high quality involves factors such as consistency, reliability, durability, performance, and meeting customer expectations. It can be subjective to some extent depending on individual preferences and requirements but often involves measurable standards and benchmarks.  Types of Quality: ⚫ Product Quality: Focuses on the quality of goods, including physical attributes, performance, and reliability. ⚫ Service Quality: Evaluates the quality of services based on factors like responsiveness, reliability, assurance, empathy, and tangibles. ⚫ Process Quality: Examines the quality of the processes used to create products or services, focusing on efficiency, effectiveness, and consistency. ⚫ Approaches to Quality Management: ⚫ Total Quality Management (TQM): A holistic approach to quality that emphasizes customer satisfaction, continuous improvement, and employee involvement. ⚫ Six Sigma: A structured methodology for process improvement and reducing defects. ⚫ Lean Manufacturing: A set of principles and techniques aimed at eliminating waste and improving efficiency in production processes. Modern Perspectives: ⚫ Customer-Centricity: The focus has shifted from meeting specifications to exceeding customer expectations. This means understanding customer needs, anticipating future trends, and creating products and services that deliver exceptional value. ⚫ Digital Transformation: Technology has revolutionized quality management, enabling data analysis, predictive modeling, and automation to improve processes, enhance decision-making, and create more personalized experiences for customers. ⚫ Sustainability: Increasingly, businesses are incorporating sustainability into their quality management frameworks, considering environmental impact, ethical sourcing, and social responsibility as integral elements of their quality standards.  Future of Quality: ⚫ Predictive Quality: influencing data analytics and machine learning to proactively identify and prevent quality issues before they arise. ⚫ Personalized Quality: Tailoring products and services to meet the individual needs and preferences of each customer. ⚫ Quality as a Competitive Advantage: Quality is no longer a mere standard; it is becoming a key differentiator in competitive markets, with customers increasingly willing to pay a premium for products and services that consistently deliver exceptional value. Understanding the VISION ⚫ A vision is a statement that outlines the long-term aspirations and future goals of an organization. It describes what the organization aims to become or achieve over time, setting a clear direction for its future. The vision is more inspirational and forward-thinking, providing a picture of what success looks like. Purpose: To inspire and motivate, guiding the organization toward its long-term goals. Focus: Future achievements and the impact the organization wants to make. Example: “To be the leading healthcare provider in the region, recognized for excellence in innovation and patient care.”  Understanding THE MISSION ⚫ A mission is a statement that defines the core purpose of an organization—why it exists, what it does, and for whom. It describes the present objectives of the organization, outlining its goals and approach to reach them. The mission is usually focused on practical elements, such as what products or services the organization provides and how it creates value for its customers or stakeholders. Purpose: To clarify what the organization does, who it serves, and how it operates. Focus: Present-day actions and the company’s purpose in the current market. Example: “To provide high-quality, affordable healthcare to our community, improving lives through patient-centered care.”  Vision statement examples Concept-based vision statements This can be a general statement focused on customers, or a position the company wants to hold within the industry. Below are a few examples of concept-based vision statements: ⚫ BBC: “To be the most creative organization in the world” ⚫ Disney: “To make people happy.” ⚫ Google: “To provide access to the world’s information in one click” ⚫ IKEA: “To create a better everyday life for the many people” ⚫ Instagram: “Capture and share the world’s moments” Quality-based vision statements Quality-based vision statements can also relate to company culture and operations. ⚫ Amazon: “Our vision is to be earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.” ⚫ Ford: “People working together as a lean, global enterprise to make people’s lives better through automotive and mobility leadership.” ⚫ McDonald’s: “To move with velocity to drive profitable growth and become an even better McDonald’s serving more customers delicious food each day around the world.” ⚫ Starbucks: “To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”  Example of mission statements ⚫ Google: "To organize the world’s information and make it universally accessible and useful." ⚫ Nike: "To bring inspiration and innovation to every athlete (If you have a body, you are an athlete)."* ⚫ Tesla: "To accelerate the world’s transition to sustainable energy." ⚫ Amazon: "To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices." ⚫ Microsoft: "To empower every person and every organization on the planet to achieve more." ⚫ Starbucks: "To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time." ⚫ These mission statements highlight the companies' current purposes, focusing on what they do, whom they serve, and the value they provide.  Example of mission and vision statements 1. Microsoft: Mission: "To empower every person and every organization on the planet to achieve more." Vision: "To help people and businesses throughout the world realize their full potential." 2. Tesla: Mission: "To accelerate the world’s transition to sustainable energy." Vision: "To create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles." 3.Company: Amazon ⚫ Mission: We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience. ⚫ Vision: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online. 4.Google: Mission: "To organize the world’s information and make it universally accessible and useful." Vision: "To provide access to the world’s information in one click." 5. Nike: Mission: "To bring inspiration and innovation to every athlete in the world." Vision: "To remain the most authentic, connected, and distinctive brand." 6. IKEA: Mission: "To offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them." Vision: "To create a better everyday life for the many people." Environmental Analysis (SWOT) SWOT analysis is one of the most commonly used tools and technique in today’s business world. It is a simple structured planning approach to evaluate Strengths, Weaknesses, Opportunities and Threats. ⚫ Strengths (such as a strong brand) and ⚫ Weaknesses (such as low cash flow) should be internal factors, ⚫ Opportunities (like a trade show) and ⚫ Threats (such as a new competitor) should be external to your business and your influence. (assignment) SWOT Analysis for a Clothing Retailer ⚫ Strengths: Strong social media presence driving customer engagement. Wide range of clothing appealing to different age groups and fashion tastes. Affordable prices compared to competitors. Well-established relationships with suppliers, ensuring timely restocking. ⚫ Weaknesses: Limited e-commerce infrastructure, relying mostly on physical stores for revenue. Poor customer service reviews affecting reputation. High inventory levels leading to overstock and unsold items. Lack of premium or exclusive collections, making it hard to compete with high-end brands. ⚫ Opportunities: Growth in online shopping, providing the chance to expand e-commerce operations. Sustainability trends that can be addressed by introducing eco-friendly clothing lines. ⚫ Threats: Fast-fashion competitors such as H&M and Zara driving down prices. Rising shipping and manufacturing costs due to global economic factors. Changing fashion trends that could make inventory obsolete. Increasing environmental regulations on clothing production and waste. ⚫ 3. SWOT Analysis for a Software Startup ⚫ Strengths: Innovative product offering with unique features that competitors lack. Agile development process allowing quick adaptation to market changes. Small but highly skilled team of developers and designers. Strong network of early adopters and industry experts providing feedback. ⚫ Weaknesses: Limited funding and resources compared to larger, established competitors. Lack of brand recognition in a highly competitive tech industry. No clear marketing strategy to scale user acquisition. ⚫ Opportunities: Growth in demand for cloud-based solutions in various industries. Ability to scale globally through digital distribution with minimal physical infrastructure. Potential for strategic partnerships with larger tech firms for distribution and integration. Emerging markets where software penetration is low but growing rapidly. ⚫ Threats: Large competitors such as Google or Microsoft entering the market with similar products. Cybersecurity threats that could harm the company’s reputation if not managed. Economic downturns that could affect funding and customer spending on software. Changing government regulations on data privacy and security could increase compliance costs. ⚫ 4. SWOT Analysis for a Non-Profit Organization ⚫ Strengths: Strong mission that resonates with the public and stakeholders. A dedicated volunteer base with deep community ties. Long history of successful fundraising efforts. Diverse programs catering to a wide range of beneficiaries. ⚫ Weaknesses: Reliance on donations, leading to unstable funding. Lack of digital presence, limiting outreach to younger generations. High turnover of staff and volunteers, affecting program continuity. ⚫ Opportunities: Increased use of social media and crowdfunding platforms to attract younger donors. Partnership opportunities with corporations looking to fulfill social responsibility goals. Expanding programs to reach underserved communities. Grants and funding available from government and international organizations. ⚫ Threats: Economic downturn leading to reduced donations and funding. Competition from other non-profits for limited funding sources. Changes in government policies that could limit the organization’s operational capacity. ⚫ 5. SWOT Analysis for a Restaurant ⚫ Strengths: Excellent reputation for high-quality food and service. Skilled and experienced culinary team. Prime location in a busy, tourist-heavy area. Unique menu that blends traditional and contemporary cuisines. ⚫ Weaknesses: High rent and operational costs due to prime location. Limited online ordering and delivery options. Dependence on a seasonal tourist population. Inconsistent social media marketing strategy. ⚫ Opportunities: Expanding into online delivery and partnering with apps like UberEats and DoorDash. Catering services for corporate events and private functions. Growing trend of farm-to-table dining, offering an opportunity to source local ingredients. Opening a second location in a nearby city. ⚫ Threats: Increased competition from new restaurants in the area. Rising costs of fresh ingredients due to supply chain issues. Potential food safety concerns that could harm the restaurant's reputation. B) BUSINESS RESOURCES ⚫ For a business to be able to produce goods and services, it needs access to resources. ⚫ Resources : are the inputs into processes which turn out products –goods and services –which can be provided for consumers, usually for a price, ⚫ There are a number of ways in which resources can be categorized. One common one, used by economists, is to consider five "factors of production": 1. Land (or natural resources) This is used in two senses: (a)the space occupied to carry out any production process, such as the space for a factory or office. (b)the basic resources within land, extracted for productive use, such as metal elements, coal and oil. 2. Labor (workers) Labor covers any mental or physical effort by humans used in a production process. It is increasingly accepted that the workers are the most important resource in any organization. Indeed, by carefully selecting the ‘right’ employees, monitoring their performance. 3. Capital (This includes machine, tools, buildings. Two main categories: (a)Real capital consists of the tools, equipment and human skills employed in production. physical capital, e.g. factory buildings, machines or equipment, human capital–the accumulated skill, knowledge and experience without which physical capital cannot achieve its full productive potential. (b)Financial capital is the fund of money which, in a modern society, is usually needed to acquire and develop real capital, both physical and human.  4. Entrepreneurship or Management Skills For a business to become established, grow and become successful, management skills are vital. Most businesses need someone to take a risk and have the necessary ability and skills to set up and run a business. ⚫ Sir Richard Branson, who created the Virgin companies, starting from a small record business and developing the brand into a number of other markets as diverse as air travel and banking ⚫ Bill Gates, who founded Microsoft and exploited the opportunity of creating a standardized, efficient and effective operating system (Windows) for personal computers based on IBM's initial work on a system called MS 5. Knowledge ⚫ Information and knowledge C) ACCOUNTABILITY ⚫ Accountability is the process by which a person or persons is required to report to others on the exercise of responsibilities given to those others. ⚫ the accountability not only of the managers and owners but others. Who are those others? Stakeholders: All the people who stand to gain or lose by the policies and activities of business and whose concerns the business needs to address Customers employees owners/stockholders Suppliers bankers Media Local community Definition Lean startups are a methodology for developing businesses and products, which aims to shorten product development cycles and rapidly discover if a proposed business model is viable. This method was popularized by Eric Ries in his 2011 book The Lean Startup. The approach emphasizes the importance of iterating based on customer feedback and focusing on key activities that bring value, allowing startups to grow efficiently and reduce the risk of failure. Design Thinking is a human-centered, iterative approach to problem-solving and innovation that focuses on understanding users, challenging assumptions, and redefining problems to create innovative solutions. It emphasizes empathy with users, collaborative ideation, and rapid prototyping. Design thinking is used across various industries for product development, service improvement, and organizational innovation.  Cont., Outsourcing: it means contracting with other companies to do some function of the firm. Entrepreneur: A person who risks time and money to start, manage and expand a business. Entrepreneurship plays a crucial role in the business world by driving innovation, creating jobs, and fostering economic growth. Entrepreneurs identify opportunities, take risks, and mobilize resources to bring new products, services, and business models to market. Revenue: The total amount of money a business takes in during a given period by selling goods and services  Cont., Profit The amount of money a business earns above and beyond what it spends for salaries and other expenses. Loss When a business’s expenses are more than its revenues. Cont., Standard of living The amount of goods and services people can buy with the money they have. For ex.: Prices for goods and services in Germany and japan are higher than in the united states so a person can buy less so states has the highest standard of living. example: a bottle of water can cost in state 1 $ but in Germany 3 euro. Quality of life The general well-being of society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure and rewards that add to the satisfaction and joy that other goods and services provided by nonprofits org., and government agencies. Cont., ⚫ Nonprofit organizations strive for financial gains to meet their social or educational goals rather than for personal profit. ⚫ Social entrepreneurs are people who use business principles to start and manage not-for profits and help address social issues. Corporate social responsibility (CSR) ⚫ CSR initiatives demonstrate a commitment to ethical practices, environmental sustainability, and social impact, aligning business objectives with broader societal goals. Government can promote business by… 1. Minimizing spending and keeping taxes and regulations to a minimum. 2. Allowing private ownership of businesses. 3. Minimizing interference with the free exchange of goods and services. 4. Passing laws that enable businesspeople to write enforceable contracts. 5. Establishing a currency that’s tradable in world markets. 6. Minimizing corruption. Learning Outcome (2) The learner will: Understand how the external environment creates opportunities and threats for a business ⚫ 2.1 Describe the effect of environment on businesses Examples of Business Environment Classification: ⚫ 1. Internal Environment Example: ⚫ A company’s internal culture that promotes innovation and creative thinking can foster the development of new products. On the other hand, if a company’s management is rigid and bureaucratic, it may face delays in decision-making. ⚫ 2. Micro Environment Example: ⚫ A smartphone company’s relationship with its suppliers may influence production costs. If the supplier raises the price of key components, the company might face increased manufacturing costs, affecting pricing and profitability. 3. Macro Environment Example (PESTLE): Political: A change in trade regulations can affect a company’s ability to import raw materials. Economic: During a recession, consumers may reduce spending, impacting sales. Social: A rise in health-conscious consumers can drive demand for organic food products. Technological: The introduction of 5G technology could revolutionize the telecommunications industry. Legal: New data protection laws, like GDPR, may require companies to change how they handle customer data. Environmental: Pressure to adopt sustainable practices may lead companies to develop eco-friendly products. 5- The global business environment ⚫ War and terrorism ⚫ Ecological environment Conclusion ⚫ Classifying the business environment helps businesses understand the factors that influence their operations. By analyzing the internal and external environments, businesses can make strategic decisions to adapt, innovate, and remain competitive.