COMM 101B Notes PDF - Business Environment, PESTLE, SWOT Analysis - Study Notes

Week 1 – What’s the Business Environment? External Analysis Porter’s 5 Forces → Examines the 5 forces that make a company competitive → Examines where power lies in a competitive situation → Helps identify its strengths and weaknesses 1.​ Rivalry among existing...

Week 1 – What’s the Business Environment? External Analysis Porter’s 5 Forces → Examines the 5 forces that make a company competitive → Examines where power lies in a competitive situation → Helps identify its strengths and weaknesses 1.​ Rivalry among existing competitors – A higher degree of competition means the power of competing companies decreases. When competition is low, companies can do whatever they need to increase profits. 2.​ Threat of new entrants – A company’s power decreases when new / more players enter the market. Companies prefer to operate in a market / industry with fewer players. 3.​ Bargaining power of suppliers (seller) – The fewer suppliers there are in the market means that they have more power (using scarcity to their advantage) 4.​ Bargaining power of buyers – When consumers have more bargaining power, they might be able to affect the price of G&S, driving prices down. 5.​ Threat of substitute products & services in the market – The products & services by a rival that can easily be substituted threaten a business’s profitability. PESTLE → An analytical tool that helps identify how various external factors influence an organization and its competitive standing PESTLE analysis allows managers, marketing, and financial experts to examine specific factors (outside of money) when making decisions about the company’s services or products. Situation Analysis – analytical tool for assessing the complete situation. The 5 Cs SWOT Analysis ​ What does the company do well? ​ What unique resources or capabilities does it have? Strengths ​ What gives it a competitive Internal – pertains to the firm advantage? ​ What do customers perceive as strengths? ​ Where does the organization lack Weaknesses resources or expertise?  ​ What do competitors do better? ​ Are there gaps in products, services, or operations? ​ Are there negative perceptions about the brand? ​ Are there emerging trends that favour the business? ​ Are there untapped markets or new customer segments? ​ Are competitors facing Opportunities difficulties that the company can capitalize on? ​ Are there regulatory or technological External – pertains to the advancements that macro or competitive benefit the business? environment ​ What are competitors doing that could threaten success? ​ Are there economic or regulatory challenges? Threats ​ Are changing customer preferences a concern? ​ Are there technological or market disruptions? -​ Helps assess the current situation  Internal Analysis VRIO – analytical tool for assessing sustainable competitive advantage (SCA) Week 2 - Sustainability and ESG What is sustainability in business? Refers to doing business without negatively impacting the environment, community, or society as a whole Addresses 2 main categories: 1.​ The effect business has on the environment 2.​ The effect business has on society Why is sustainability important? Sustainability can drive business success. -​ Companies w high ESG ratings have a lower cost of debt and equity -​ Sustainability initiatives can help improve financial performance while fostering public support → Investors use environment, social, and governance (ESG) metrics to analyze an organization’s ethical impact and sustainability practices. -​ Ex. Carbon footprint, water usage, community development efforts, board diversity  How can businesses create a more sustainable business strategy? 1.​ Assess the problem & define objectives 2.​ Establish your mission 3.​ Craft your strategy 4.​ Implement strategy and assess results The Sustainable Development Goals (SDGs) are a set of 17 goals established by the United Nations to address global challenges. The goals are intended to improve the lives of people around the world while also preserving the planet. Some SDGs include: -​ Goal 1: No poverty -​ Goal 2: Zero hunger -​ Goal 4: Quality education -​ Goal 5: Gender equality -​ Giak 6: Clean water -​ Goal 13: Climate action What’s an ESG? Environmental Social Governance  Week 3 - Strategy & Business Models What’s Strategy? https://www.youtube.com/watch?app=desktop&v=o7Ik1OB4TaE Defn: Positioning an organization for competitive advantage. A company’s plan to create value; is not focused on profit, but on looking forward to planning for the future -​ Building value for customers, employees, and suppliers Value: The difference between willingness-to-pay (customer) and willingness-to-sell (supplier/employee) ​ Willingness-to-pay: The most a customer would pay for a product/service. ​ Willingness-to-sell: The least amount of compensation an employee is willing to accept and still work for a company. ↑ Willingness-to-pay ↓ Willingness-to-sell -​ Product quality -​ Higher compensation (value redistributed from -​ Product complements company to employees) -​ Network effects -​ Create more attractive working conditions for employees (value creation) Competitive Advantage Defn: refers to factors that allow companies to produce goods or services better/more cheaply than their competitors ➔​ Has comp advantage when it’s successful in designing and implementing a value-creating strategy that rivals currently aren’t using ➔​ A comp advantage is sustainable when current/new competitors aren’t able to imitate or supersede it Plans VS Strategy A plan and a strategy are NOT the same. Strategy: Positioning an organization for competitive advantage.  ➔​ A great strategy must have a coherent theory, be doable and be translatable into actions. Planning doesn’t require coherence, but it’s Strategy requires putting yourself out and comfortable since it involves resources you specifying an outcome involving customers can control. wanting your product/service enough that they’ll buy enough of it to make the profitability you’d like. -​ You control costs -​ Actual customers are customers -​ You’re the customer -​ You don’t control customers -​ It’s comfortable -​ You don’t control revenues How: 1. Start by identifying the playing field you want to be on. Determine where you can win. 2. Develop a theory as to why this playing field is the right one for you to be on. 3. Determine how you will win on this playing field. What can you do to serve the customers better than anyone else? 4. Translate your theory and choices into concrete actions. What: 1. Focus on a specific market segment and differentiate it from competitors. 2. Keep the business model simple and streamlined. 3. Use a clear and concise strategy that is easy to communicate and understand. 4. Accept uncertainty and take calculated risks. 5. Continuously monitor and adjust the strategy based on the changing environment. Business Model Defn: describes the rationale of how an organization creates, delivers and captures value It can be described through 9 building blocks: 1.​ Customer segments (demographics, salary) 2.​ Value propositions 3.​ Channels 4.​ Customer relationships 5.​ Revenue stream 6.​ Key resources 7.​ Key activities 8.​ Key partnerships 9.​ Cost structure  The Business Model Canvas The right side of the BMC focuses on the customer (external), left side focuses on the business (internal) Week 4 Finance studies describe the ways people, businesses, and organizations raise, allocate, and use monetary resources over time (taking into account the risks that come with their projects) Finance Accounting ​ The ways a person/organization ​ The process of reporting and generates and uses capital and communicating financial information manages their money about an individual, business, or organization E.g. investing, borrowing, lending, budgeting, and forecasting E.g. recording transactions, collecting financial information, compiling reports, and analyzing and summarizing performance Key decision areas in finance: 1.​ Investment decisions - how and where to invest the firm’s capital a.​ Capital budgeting: method of analyzing & comparing future investments to determine which ones are most worthwhile b.​ Working capital management: managing current assets and liabilities to ensure liquidity 2.​ Financing decisions - what type of capital to secure for the firm a.​ Capital structure: the sources of funding the organization uses to operate (debt (LT, ST?), equity (shareholders, reserves?), or a combination) 3.​ Dividend decisions - reward shareholders vs retaining earnings Primary vs secondary markets Money markets Defn: trade debt securities that’ll mature within 1 year Selected instruments: ​ Treasury bills - ST gov securities; doesn’t issue interest, but sell at discount to FV  ​ Commercial paper - unsecured ST notes (under 270 days) issued by non-financial firms (e.g. credit-worthy corporations, utilities, …) ​ Finance company paper ​ Banker’s acceptances ​ Day loans Capital markets Defn: trade LT debt securities & preferred & common shares ​ Bonds - LT debt instrument (typically 10 years and over); provides interest rate, payment, and repayment schedule ​ Debentures - an unsecured bond ​ Common shares ​ Preferred shares Primary Market Secondary Market Firm issues securities to investors for the first Investors buy and sell securities to each other time Initial Public Offering (IPO) - a private company sells shares to the public for the first time; transitioning from private to public ownership, “going public” ★​ Access to a larger pool of capital to fund growth initiatives Private markets ​ Angel investors High-net-worth people who fund early-stage ventures in exchange for equity ​ Venture capitalists Professional investors; typically invest more money at later stages ​ Private equity Professional investors; more money and later still Analysis of financial statements Vertical analysis Examines the relationship between data at a specific point in time (common size income statement) Horizontal analysis Examines the relationship between data across multiple points in time (trend analysis) Ratio analysis Connects two or more data points from the financial statements (can support vertical and/or horizontal analysis) Others… Ratio analysis Profitability ratio - how profitable is the company? Liquidity ratio - how liquid is the company? Leverage ratio - how dependent is the company on debt? Activity ratio - how well is the company using its resources? Profitability ratios Liquidity ratios Leverage ratios Activity ratios Breakeven analysis Week 5 - OB & HR Management Midterm: Practise making correct operating statements for the financial analysis portion Mini case - ESG, strategy, HR Function and Role of the CHRO Human resource management: function of attracting, developing, and retaining employees who can perform the activities needed to meet organizational objectives 3 main objectives: 1.​ Providing qualified, well-trained employees 2.​ Maximizing employee effectiveness 3.​ Satisfying individual employee needs through monetary compensation, benefits, opportunities to advance, and job satisfaction → to retain employees Key decision areas of the HR function: -​ Recruiting and staffing -​ Training and development -​ Performance management -​ Compensation and benefits -​ Safety and compliance -​ Talent compliance -​ Labour relations Labour relations Defn: the connection and agreements between employer and employees Focusses on preventing and resolving employee-related problems, usually regarding employees covered by a collective agreement or union contract ​ Management of employee contracts, documentation of grievances, coordination with unions, staying up to date with the current labour law Organizational Structure (Design) Defn: a visual diagram of a company that describes what employees do, whom they report to, and how decisions are made across the business. Popular types of organizational structures: -​ Functional -​ Divisional -​ Market -​ Product -​ Geography -​ Matrix Organizational Culture Defn: the tacit social order of an organization Why is organizational culture important? -​ Shared values and beliefs -​ Shapes our experiences of work -​ Acceptable/unacceptable behaviour -​ Expectations and norms Ways culture is communicated: -​ Mission statements -​ Founders’ stories -​ symbols/artifacts -​ Rites, rituals, ceremonies Leadership Defn: the capacity to translate a vision into reality Leadership vs Management Leadership Management Relates to transformational capabilities: Relates to transactional capabilities: Positively influence the flow of emotion, Plan, organize, direct, develop, and control motivation, and perception of employees