Introduction to Business - Topic 1-8

**1.** **DEVELOPING A BUSINESS MINDSET** **Business** -- any profit-seeking organization that provides goods and services designed to satisfy the customers' needs - the business of business adding value to satisfy customers (businesses add value and accept risk) economic profit + positive i...

**1.** **DEVELOPING A BUSINESS MINDSET** **Business** -- any profit-seeking organization that provides goods and services designed to satisfy the customers' needs - the business of business adding value to satisfy customers (businesses add value and accept risk) economic profit + positive impact on environment sustainability + social aspect (improving conditions for employees) **Profit**: money left over after all the costs involved in doing business have been deducted from revenue **Competitive advantage**: some aspect of a product or company that makes it more appealing to target customers [How do businesses add value? ] **The business model canvas The Business Model-- Osterwalder & Pigneur** -- a type of visual plan that displays the business in 9 blocks easy model of how a business work [value proposition] (what value do you offer to your customer) mixture of key actions, machineries, partners... [key activities] (buy ingredients/machines/actions that need to be done) often you cannot do it by yourself [key partners] (screen in car) [customer segments] -- it's important to target the right customer group [channels] - transport from A to B (how to you get the good to the customer) [customer relationships] -- especially long term [key resources] [cost structure] -- all the costs add up [revenue streams] **Categorizing businesses** **Product types and ranges** -- good (most are tangible) vs services - product ranges **Company sizes** -- [SMEs] (most of them, below 250 people): easier to manage and to adapt to changes in the market, better connection to the customers, - [large corporations]: big influence, high market share, cheaper prices (when you produce more), strong market power (use it in terms of sourcing), **Geographic reach** -- local, regional, national, international **Ownership** -- sole proprietorships, partnerships, corporations: **Positive and negative effects of business** Potential contributions: offering valuable goods and services, providing employment, paying taxes. Contributing to growth, stability and security Potential negative effects: generating pollution and creating waste, creating health and safety risks, disrupting communities, causing financial instability **Business mindset** -- a view of business that considers the myriad decisions that must be made and the many problems that must be overcome before companies can deliver the product that satisfy customer needs -adopting an insiders view of business with an appreciation for the decisions and challenges that managers face  [Economic environment]: **Gig economy:** portion of the economy composed of people who work as independent contractors on a series of short-term projects/tasks [Social environment] -- cruise ship example, what people think is important (animal testing) trends and forces in society **Stakeholders**: internal and external groups affected by a company's decisions and activities [Legal and regulatory environment] -- covid, legal restrains affect the business, subsidies laws and regulations as local/state/international level [Technological environment] [Market environment] -- stability comes from high barriers to entry Changes in environments -- ecology, globalization, mobility, urbanization.... **Porter\`s five forces analysis** **Identifying the Major Functional Areas in a Business Enterprise** Research and development (**R&D**) -- functional area responsible for conceiving and designing new products Information technology (**IT**) -- systems that promote communication and information usage through the company or thet allow companies to offer new services to their customers Manufacturing, production or operations [-] An area where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses) -- Purchasing, logistics, facilities management Marketing Finance and accounting -- ensured the company has the funds it needs in order to operate - Accounting -- you have to report because you are responsible Human resources (HR) - recruiting, hiring, developing, and supporting employees Business services -- exist to help companies with specific needs in law, banking, real estate, and other areas **Operations management**: management of the people and processes involved in creating goods and services **Professionalism** -- the quality of performing at a high level and conducting oneself with purpose and pride - Be: the best, dependable, a team player, respectful, clear (communication), ethical in detail in ppt **Etiquette** -- The expected norms of behaviour in any particular situation [Communicating effectively] listen actively, provide practical information, give facts rather than vague impressions, do not present opinions as facts, clarify expectations and responsibilities, offer compelling, persuasive arguments... **Digital enterprise**: any company that uses digital systems as one of the foundations of its value-creation processes, regardless of what industry it is in or what products it makes **Disruptive innovation**: development so fundamentally different and far reaching that it can create new professions, companies or even new industries [Digital transformation]: process of reimagining company's business model & operations to become a digital enterprise **2. BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY** **Ethics** - The rules or standards governing the conduct of a person or group **Ethical behaviour** competing fairly and honestly, communicating truthfully, not causing harm to others... Insider trading: the use of unpublicized information that an individual gains from the course of his job to benefit from fluctuations in the stock market Sources of unethical behaviour [Greed] -- belief that the protentional rewards of unethical behaviour outweigh the risks of getting caught [Lack of integrity] -- case of stealing company property and morality- case of abuse of power [Management pressure] -- e.g. to meet sales quotes [Dysfunctional corporate culture] -- e.g. lack of clear criteria for a career promotion Strategies for Supporting Ethical Behavior Start from the top, Code of ethics, Train and support employees, Transparency - The degree to which affected parties can observe relevant aspects of transactions or decisions Whistle-blowing [(feedback channels)] -The disclosure by a company insider of information that exposes illegal or unethical behaviour by others within the organization **Ethical lapse**: a situation in which an individual/group makes a decision that is morally wrong, illegal or unethical **Ethical dilemma** -- situation where more than one side of an issue can be supported with valid ethical arguments - Stakeholders' rights: A difficult balancing act in PPT [Finding the Right Answer When Faced with an Ethical Dilemma] frame the situation accurately, identify all parties, be objective, be open, watch out for conflicts of interests **[Approaches to Resolving Ethical Dilemmas]** PPT (Justice/utilitarianism/individual rights/individual responsibilities/ the common good/virtue) **Conflicts of interest:** situations where competing loyalties can lead to ethical lapses **CORPORATE SOCIAL RESPONSIBILITY (CSR)** Idea that business has obligations to society beyond pursuit of profits Relationship between business and society Profit-seeking companies are the economic engine that powers modern economy: they generate a majority of money Consumers in contemporary societies enjoy and expect a wide range of benefits many of those goods and services are created by profit-seeking companies Companies cannot hope to operate profitably without the many benefits provided by a **stable, functioning** society and the environment that is **protected** and treated with respect **Socio-economic embeddedness** of business activities results in: Paying taxes, job opportunities, well-functioning and safe in use products, increased range of sustainable products/services--are socially and ecologically fair business process, Involving in philanthropic actions **Philanthropy** -- donation of money, time, goods or services to charitable, humanitarian or educational institutions **Strategic CSR** -- social contributions that are directly aligned with a company's overall business strategy **Minimalist CSR** -- companies do not have social responsibilities beyond earning money and obeying the law **Cynical CSR** -- companies use CSR as a marketing tactic to promote itself as socially or environmentally responsible without making substantial improvements in the business practices - Greenwashing: a phenomenon for publicity efforts that portray companies as being (more) environmentally friendly as they actually are (*fast-fashion industry)* **Defensive CSR** [Nongovernmental organizations (**NGOS**)-] nonprofit groups that provide charitable services or promote social and environmental causes [CSR as a response to criticism --]company takes positive steps to address a particular issue because it has been embarrassed into action by negative publicity (*Volkswagen emission scandal)*-they choose after being shamed/forced **Proactive CSR** [Purpose-driven business]- a company that aspires to accomplish more than just making money for owners and investors [Moving beyond CSR] - Company's leaders and employees ask: "How can we be a force for good?" and not just: "How can we avoid being bad?" - Investing in areas that are aligned with the company's business mission -- CSR: The Natural Environment -- - CSR: Consumers an anadama - CSR: Employees aaaaaaaaaaaaaaaa Sustainable development meeting the needs of the present without compromising the ability of future generations to meet their needs - Demand for a departure from pure profit maximization - Rethinking growth and over-consumption Environmental oriented business Operating business in a manner that minimizes pollution and resource depletion, ensuring that future generations will have vital resources **CSR Consumers** [Consumerism] - A movement that pressures businesses to consider consumer needs and interests Rights to buy safe products safely, to be informed, to choose which products to buy, to be heard, to digital security [Identity theft]: crime in which thieves steal personal information and use it to take out loans and commit other frauds **CSR Employees** **Actions for equality: Discrimination:** denial of opportunities to individuals on the basis of some characteristic that has no bearing on their ability to perform in a job - **Glass ceiling:** an invisible barrier attributable to subtle discrimination that keeps women and minorities out of the top positions in business **Workplace safety -** Employers have an ethical and legal responsibility to ensure the safety of their employees in the workplace, also in factories abroad (*monitoring working conditions to eliminate forced labour, slavery, and human trafficking!*) + Work-life balance and mental health (*preventing mobbing, burn-out, back diseases etc)* **Affirmative action** -- Activities undertaken by businesses to recruit and promote members of groups whose economic progress has been hindered through either legal barriers or established practices *The big world of small business* **Small business** [US]: company that is independently owned and operated, not dominant in its field, employs less than 500 people [EU]: SME (Small and medium-sized enterprise) -- differs in number of employees and turnover (table in ppt) - [99% of business in EU are SMEs (in EU), around 2/3 workers work in them] - Almost 50% of them are [one-person] enterprises - 103 500 are [hybrid enterprises]: people who open a business besides their normal job - 8% [silverpreneurs] -- elderly people who start and operate a business Economic roles of small business - Provide more jobs than large businesses - do more innovations (produce more patents) - meet the needs of larger organizations - inject a lot of money into the economy - take larger risks then larger companies Characteristics of small business - narrow focus - limited resources - more freedom to innovate *high innovation rate of Austrian SMEs* - easier to make decisions quickly and react to changes in the marketplace Strengths of Austrian SMEs sustainability (closing the circle by using materials again, extending the products usage - internalisation - financing (good funding options for new businesses etc.) Challenges of Austrian SMEs digitalisation ( R&D activities financing (a need to catch up in the area of equity and venture capital financing key challenges: shortage of skilled workers, energy & raw materials prices, labour costs, supply chain problems **Start-ups** companies that are less than 10 years old, are innovative with their products, services, technologies, aiming for significant employee or sales growth **Scale-ups** at least 15 employees, have shown an average annual growth in employees or sales in at least 20% in the last 3 years or have already raised at least 3 million euros in external equity [Incubator] helps early-stage startups develop ideas into workable business models and establish company framework **[Accelerator programs]** -- have a defined duration, give support, meetings with investors - Work with existing companies with the primary goal of making them [more attractive to investors] **Spin-offs** split of an existing organization, large company comes up with a new idea and wants to make a new department (company) for that idea Green and social start-ups **ENTREPRENEURSHIP AND ENTREPRENEURS** Innovation! [E-preneur/technology] entrepreneur -- creation to develop some form of advanced technology [Eco-sustainable] entrepreneur -- addressing a social problem [**Eco-disband the team, may involve post-project analysis... TEAM CONFLICT Constructive vs destructive conflict [Structural] conflicts -- more or less permanent aspects of being in business [Situational] conflicts -- arise from temporary forces within an industry or a company [Interpersonal] conflict -- stemming from personal choices, behaviours and personality differences [How to solve conflict:] proactive attention, communication, openness, research, flexibility, fair play, alliance **Unstructured organization**: an organization that doesn't have a conventional structure but instead assembles talent as needed from the open market; the virtual and networked organizational concepts taken to the extreme [Benefits]: increased agility, lower fixed costs and more flexible capacity management, access to otherwise unreachable talent, benefits of competition - Performance-based evaluation, freedom and flexibility, access to job that might be otherwise unattainable [Disadvantages:] complexity and control issues, uncertainty, loss of meaning and connection, diminished loyalty, career development, management succession, accountability and liability **Taskbot** -- a software agent can be assigned to complete a variety of tasks within an app or business system **Robotic process automation (RPA) --** a software capability that does for knowledge work what mechanical robots do for manufacturing and other physical processes targets high-volume paperwork aspects of business - Good, businesses are adopting RPA to improve efficiency and process accuracy **7. THE ART AND SCIENCE OF MARKETING -reading** **Marketing** -- process of creating value for customers and building relationships with those customers in order to capture value back from them **Needs-**differences between a person's actual state and his ideal state: provide basic motivation to make a purchase **Wants-** specific goods, services, experiences etc. that are desirable in light of a person's experiences, culture and personality more specific **Exchange process-**act of obtaining a desired object or service from another party by offering sth of value in return **Transaction-**an exchange of value between parties **Utility:** the power of a good/service to satisfy a human need *Form utility*: when companies change raw materials into raw goods *Time Utility* (FedEx, UPS) + *place utility* (espresso stands in office and ATMs at malls) both (iTunes) *Possession utility*: satisfaction that buyers get when they actually possess a product, legally and physically Selling concept.... **Marketing concept**- approach to business management that stresses customer needs and wants, seeks long-term profitability and integrates marketing with other functional units within the organization **Relationship marketing**- a focus on developing and maintaining long-term relationships with customers, suppliers and distribution partners for mutual benefit--keeping existing customers is cheaper and satisfied ones are best promo **Customer loyalty** -- the degree to which customers continue to buy from a particular retailer or products offered by a particular manufacturer or service provider *costumers will do so if the company is loyal to them, meets their needs* **Customer relationship management (CRM):** a type of information system that captures, organizes and capitalizes on all the interactions that a company has with its customers **Social commerce**: the creation and sharing of product related information among customers and potential customers **Voice of the customer (VoC**): everything that current and potential customers are saying and writing about a company and its products; also refers to efforts to capture all this feedback **Attribution**: the contribution a given marketing activity makes to sales and other marketing goals **Marketing research:** the collection and analysis of information for making marketing decisions **Permission-based marketing**: a marketing approach in which firms first ask permission to deliver messages to an audience and then promise to restrict their communication efforts to those subject areas in which audience members have expressed interest Marketing research techniques; observation, ethnographic research, surveys, interviews, process data, experiments... **Customer experience:** the cumulative effect of the costumer journey from presales exploration through purchase through product use and ownership **Touchpoint**: any point of interaction, online/ phone/in person -- between a company and its current and potential c. **Consumer market**: individuals or households that buy goods and services for personal use **Organizational market**: companies, government agencies and other organizations that buy goods and services either to resell or to use in the creation of their own goods and services THE CONSUMER DECISION PROCESS Cognitive decision-making rational, data-driven approach, comparing labels in grocery store, takes time and energy Habitual decision-making Affective decision-making driven by moods and emotions **Cognitive dissonance:** tension that exists when a person's beliefs don't match his or her behaviour: - [buyer's remorse] when someone regrets a purchase immediately after making it [What affects purchases]:culture, socioeconomic level, reference groups, situational factors, self-image (you're what you buy **Organizational purchasing** differs from consumer purchasing - an emphasis on economic payback and other rational factor - formal buying process greater complexity in product usage - participation and influence of multiple people close relationships between buyers and sellers  **Strategic marketing planning**: process of 1) examining an organizations current marketing situation, 2) assessing opportunities and setting objectives and then 3) developing a marketing strategy to reach those objectives Learn those definitions) **Market share**: a firm's portion of the total sales in a market a common marketing objective **Marketing strategy:** an overall plan for marketing a product: includes the identification of target market segments, a positioning strategy and a marketing mix **Market**: a group of customers who need or want a particular product and have the money to buy it **Market segmentation**: the division of a diverse market into smaller, relatively homogeneous groups with similar needs, wants and purchase behaviours **Demographics:** the study of the statistical characteristics of a population age, gender, income, race, occupation... **Psychographics:** classification of customers on the basis of their psychological makeup, interests and lifestyles **Geographic segmentation**: categorization of customers according to their geographical location **Behavioural segmentation**: categorization of customers according to their relationships with products or response to product characteristics **Target markets**: specific customer groups or segments to whom a company wants to sell a particular product [Undifferentiated marketing (mass marketing)] -- ignores differences among buyers and offer only 1 product [Differentiated marketing:] manufacture or sell a variety of products to several target customer groups [Concentrated marketing]: focuses on only a single market segment -- can be risky [Micromarketing/Individualized marketing:] narrowest of all, firms target a single location or even a single customer **Positioning**: managing a business in a way designed to occupy a particular place in the minds of target costumers **Marketing mix:** the four key elements of marketing strategy: product, price, distribution & customer communication **Product**: a bundle of value that satisfies a customer need or want **Price**: the amount of money charged for a product or service **Distribution channels**: systems for moving from producers to customers, also known as marketing channels Customer communication: activities used to communicate with and promote products to target markets **Promotion**: a wide variety of persuasive techniques used by companies to communicate with their target markets and the general public -informing, persuading, reminding promo comes in different forms **Marketing analytics:** a range of analytical tools and techniques that help marketers plan and evaluate marketing activities pulling together the multiple tools and data streams that companies often collect over time [Primary goals]: increase revenue and profits while improving the cost effectiveness of the marketing effort [Goals]*tracking customer journey, measuring effectiveness, testing promotional messaging, optimizing ad placement, prioritizing customers, measuring share of customer, measuring competitors marketing activities* **8. PRODUCTION SYSTEMS -reading** **System:** an interconnected and coordinated set of elements and processes that converts inputs into desired outputs [The system view] Point view (task) / line view (step1step2step3step4) / circular view 7 principles of systems 1) helping everyone see the big picture 2)understanding how individuals systems work and how do the interact 3)understanding problems before you try to fix them 4)Understand the potential impact of solutions before you implement them 5\) Don't move problems around -- solve them 6\) Understand how feedback works in the system 7\) use mistakes as opportunities to learn and improve **Value chain**: all the elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer each industry has a value chain and each company has it **Outsourcing**: contracting out certain business functions or operations to other companies **Value webs**: multidimensional networks of suppliers and outsourcing partners - advantages: speed, flexibility, opportunity to access a wide range of talents and technologies Risks of outsourcing in terms of control **Offshoring:** transferring a part or all of a business function to a facility (a different part of the company or another company entirely) in another countrycan shift jobs to another company or to overseas division of same company - It can help some stakeholders (investors and customers) and harm other (employees and local communities) SUPPLY CHAIN MANAGEMENT **Supply chain:** a set of connected systems that coordinate the flow of goods and materials from suppliers all the way trough to final customers **Supply chain management (SCM):** the business procedures, policies, and computer systems that integrate the various elements of the supply chain into a cohesive system - *Managing risks, responding to customer needs, managing business relationships, promoting sustainability* **Inventory**: goods and materials kept in stock for production or sale **Inventory control**: determining the right quantities of supplies and products to have on hand and tracking where those items are **Procurement**/**purchasing**: the acquisition of the raw parts, components, supplies and finished products required to produce goods and services **Materials requirements planning (MRP):** a planning system that works backward from a company's sales forecasts to make sure it has enough of everything required to build those goods or perform those services in a timely manner **Enterprise resource planning (ERP):** a planning system that addresses the needs of the entire organization, from manufacturing to sales to human resources **Tracking methods**: ability to identify and track where everything is in the system at any point in time **Blockchain** -- distributed ledger technology knows as blockchain can connect all the participants in a supply chain in a single, secure database that verifies and records every transaction PRODUCTIONS AND OPERATIONS MANAGEMENT [ ] Overseeing all activities involved in producing goods and services **Productivity:** the efficiency with which an organization can convert inputs to outputs **Lean systems**: systems (in manufacturing and other functional areas) that maximize productivity by reducing waste and delays *many lean systems borrow techniques developed and refined by the Japanese automaker TOYOTA* **Just-in-time (JIT):** inventory management in which goods and materials are delivered throughout the production process right before they are needed rather that being stockpiled in inventories **Mass production**: the creation of identical goods or service for each customer **Customized production**: the creation of a unique good or service for each customer -- *batch-of-one-production* **Mass customization**: a manufacturing approach in which part of the product is mass produced and the remaining features are customized for each buyer Well-designed facility layouts minimize wasted effort and promote collaboration **Capacity planning**: establishing the overall level of resources needed to meet customer demand **Sheduling**: determining how long each operation takes and deciding which tasks are done in which order **Critical path**: In a PERT network diagram, the sequence of operations that requires the longest time to complete: the project can't be completed any faster than the critical path determines how soon the project can be completed UNIQUE CHALLENGES OF SERVICE DELIVERY **Perishability**: most services that are consumed at the same time the are produced and cannot exist before or after - If a 200 seat plane leaves half empty 100 sales opportunities are lost forever [Location constraints:] **Scalability**: the potential to increase production by expanding or replicating its initial production capacity [Performance variability and perceptions of quality]in the eye of the beholder and cannot be judged until after the service is performed [Customer involvement and service provider interaction --] one of the biggest differences between goods and services is that customers are involved and thereby can affect the quality of- the service delivery PRODUCT AND PROCESS QUALITY **Quality**: the degree to which a product or process meets reasonable or agreed-on expectations **Quality control:** measuring quality against established standards after the good or service has been produced and weeding out any defective products **Quality assurance**: more comprehensive approach of companywide policies, practices and procedures to ensure that every product meets quality standardsgoal of increasing level of confidence that quality outcomes will be achieved **Total quality management (TQM**): an approach to quality assurance that encompasses every aspect of a company's operations every aspect of company operations pushes toward excellence in goods and services delivery **Statistical process control (SPC):** use of random sampling and tools e.g. [control charts] to monitor production process **Six sigma:** a rigorous quality management program that strives to eliminate deviations between the actual and desired performance of a business system measuring and improving quality, striving toward perfection... **ISO 9000**: a globally recognized family of standards for quality management systems, based on 8 quality management principles **Industry 4.0** the digital transformation of manufacturing, moving from automated factories to smart factories that emphasize the use of [cyber-physical systems] *Raises 2 concerns: Reliance on networking + digital disruption (likely to displace some workers in manufacturing*