Business Administration PDF

Business administration Professoressa A. Russo  Useful info Teams code eikbehw - Module materials My contacts [email protected]  8.30- 10.30 14.30 - 17.30 Room 1.7 Room 1.7...

Business administration Professoressa A. Russo  Useful info Teams code eikbehw - Module materials My contacts [email protected]  8.30- 10.30 14.30 - 17.30 Room 1.7 Room 1.7 Teams code: eikbehw Wednesday Friday Timetable Thursday 8.30- 10.30 Room B.4  ▪ 1. Foundational Concepts of BA: Understanding the basic principles and framework of business economics, including how companies operate within markets. ▪ 2. Role of Businesses in the Economy: Exploration of how businesses contribute to the wider economy, from local to global scales. Course ▪ 3. Key Business Functions: Accounting, finance, marketing, and human resource management as critical functions Objectives within a business. ▪ 4. Decision-Making: How businesses make both strategic (long-term) and operational (day-to-day) decisions using economic tools and models. ▪ 5. Real-World Application: Apply theoretical concepts to real-world business cases and scenarios, preparing students for practical business challenges. PAGE 4 ▪ BA refers to the study of the economic and managerial activities of businesses. It involves understanding how businesses operate, make decisions, What is BA and interact with the broader economy. PAGE 5  ▪ Management: How businesses are Key concepts organized, how decisions are made, and how performance is evaluated. ▪ Finance: How businesses manage financial resources, including investments and capital allocation. ▪ Operations: Understanding the production and supply chain processes within a company. ▪ Market Interaction: How businesses compete, respond to consumer demand, and adapt to economic conditions. PAGE 6 ▪ BA provides a comprehensive view of businesses from both an internal perspective (operations, finance, and Why it Matters management) and an external one (market dynamics, competition). PAGE 7  Micro-Level: Focus on internal business processes, such as managing resources, Micro vs. improving efficiency, and optimizing decision-making. Macro Perspectives Macro-Level: Understanding how businesses contribute to the economy, interact with other companies, comply with government regulations, and compete in the global market. PAGE 8  Why is it Important? - Provides a solid understanding of how Importance of businesses function and contribute to the economy. BA - Equips students with skills to analyze business performance, make informed decisions, and adapt to market changes. - Helps students develop critical thinking skills necessary for roles in management, finance, consulting, and entrepreneurship. PAGE 9 ▪ BA covers several key business areas that ensure smooth and efficient operations. These functions are Business interconnected, each playing a crucial role in the overall performance of an Admistration organization. PAGE 10  Management/Strategy Key areas Accounting Organization PAGE 11  ▪ Management is the process of planning, organizing, leading, and controlling an organization’s resources— people, finances, and operations—to achieve specific goals. ▪ Top-Level: Executives who set overall company direction. ▪ Mid-Level: Managers who translate strategies into What is actionable plans. Management? ▪ Lower-Level: Supervisors who oversee daily operations. ▪ Management is the backbone of any organization. It ensures that all other business functions operate in sync and that the company moves toward its goals. Management ranges from strategic decision-making at the top level to daily operational oversight at the lower level, all contributing to the efficiency and success of the business. PAGE 12  Planning:Setting objectives and determining the best course of action to achieve them. This includes strategic planning for long-term goals and operational planning for day-to-day activities. Organizing:Structuring the company’s resources (human, Key Functions of financial, and physical) to ensure efficient operations. This includes defining roles and responsibilities, setting up Management:els departments, and allocating resources. of Management: Leadership:Motivating and guiding employees toward achieving the company's goals. This involves communication, decision-making, and fostering a positive organizational culture.Controlling: Monitoring performance and making adjustments to ensure that goals are met. This involves setting performance standards, measuring actual performance, and taking corrective actions when necessary. PAGE 13  Accounting is the process of recording, classifying, and summarizing financial transactions. It provides essential data for decision-making and is often referred to as the "language of business." The Role of Accounting It provides a clear picture of a company’s financial health, guiding management decisions. PAGE 14 Key Functions of Accounting: Financial Accounting:Prepares financial statements (e.g., income statement, balance sheet, cash flow statement) for external stakeholders like investors and regulators. These reports show the company’s financial performance and position. Management Accounting:Focuses on internal reporting, providing data that managers use to make informed operational and strategic decisions. Reports may include budgets, forecasts, and variance analyses. Cost Accounting:Helps managers determine the cost of production, guiding decisions related to pricing, budgeting, and cost control. PAGE 15 Importance of Accounting Accounting plays in every business. It’s Accounting provides critical insights not just about keeping records but for both internal and external about providing useful information for stakeholders, helping managers make making decisions about the informed decisions, investors assess company's future. Without accurate performance, and regulators ensure financial data, management, compliance. investors, and regulators cannot evaluate the business's health. PAGE 16  ▪ Finance involves managing a company's money, What is including investments, capital structure, and risk management, to ensure the company can grow, pay its Finance? bills, and make sound investments. ▪ Key Finance Activities: ▪ 1. Capital Budgeting: Deciding where and how to invest the company’s funds for long-term growth (e.g., buying new equipment, entering new markets). ▪ 2. Capital Structure: Determining the right mix of debt and equity financing for the business. ▪ 3. Working Capital Management: Ensuring the company has enough cash flow to cover its day-to-day expenses. PAGE 17  ▪ Organization refers to how a company structures its resources—people, processes, and systems—to achieve its goals efficiently and effectively. ▪ Key Elements of Organization: Organizational ▪ Structure: Defines how roles, responsibilities, and authority What is are distributed within the company. Organization? ▪ Division of Labor: Assigning specific tasks and responsibilities to individuals or teams, allowing for specialization and efficiency. ▪ Coordination and Communication: Ensuring departments and employees work together seamlessly. Effective communication channels are crucial for alignment across teams. PAGE 18 ▪ Aim or Scope of the Entity The entity serves as a tool through which humans economically organize and Entity conduct activities related to the production and consumption of goods, fulfilling essential needs. PAGE 19  In an entity, multiple factors (such as labor, capital, resources, and technology) are integrated into the economic production process. The purpose of this combination is to achieve a specific Combination goal or outcome that individual factors cannot produce on their own. of Factors in an Entity These factors work synergistically to enhance efficiency, create value, and deliver goods or services that satisfy consumer needs. Example: Labor alone cannot create a product without capital (machinery, tools), and raw materials are ineffective without proper technology and knowledge to transform them into finished goods. PAGE 20 Entity Over the time there has been an evolution of the needs, consumption and production process. There has been a specialization of the economic activties with the introduction of the exchange process and the use of the value and money. Production of goods Production or enterprise for the exchage on Indirect satisfaction of the market human’s needs Organization other than Direct satisfaction of human Consumption of needs enterprise goods Direct and indirect Combined Production and consumption 21 Increase of usefulness and value To effectively transform inputs into outputs, the process must generate an increase in both the usefulness and value for the end user or consumer. This transformation should enhance the product or service in a way that meets the specific needs of its target audience, whether in a commercial or non-commercial context. 22 Increase of usefulness and value For the production entity (business or enterprise): The goal is to produce goods or services that not only satisfy market demand but also justify the monetary exchange between the consumer and the business. The value created must exceed the cost of the inputs and production, resulting in a product that consumers are willing to purchase at a profit to the business. For instance, a smartphone manufacturer sources raw materials (inputs), such as metals and software, and transforms them into a functional, user-friendly device (output). The increase in value comes from features like technology integration, design, and usability, which make the product appealing to customers. In turn, the business exchanges this output for a monetary value, driving profitability and market success.23 Increase of usefulness and value For organizations that provide goods or services without direct monetary exchange (non-profit or public entities): These organizations aim to meet the specific needs of users or beneficiaries, often focusing on social welfare, education, or community development. While there is no direct financial transaction, the output still needs to deliver value and usefulness to the recipient. Consider a public library, which provides access to books, digital resources, and educational programs (outputs) at no cost to the user. The value created is measured by how effectively it serves the community’s intellectual and educational needs. Although no monetary exchange occurs, the library’s success depends on the quality and relevance of its services in meeting the community’s demands. 24 Production entity: enterpise /company We have different entities that can be classified as enterprises or companies Direct Tecnical and phisical production trasformation process Indirect Trasformation in the time Entity production and in the space Production of the conditions service that faciltate the economic activities 25 The economic production for profit Process in which we create value Purchase of input Transformation Selling output Cost revenue Disbursement of money Collection of money The production is economic if Monetary value of the output > monetary value of the input 26  The scope/aim of an entity The aim of an entity is to be able to create lasting and long term benefits, present and future benefits, for the people who invest resources in the entity in different ways and with different rights The ability to create value in future The economic activty in an entity must be done in an economically 27 The conditons that support the creation of value Strategy Internal External factors and factors/conditions conditions 28  The entity is a system ❖ When considering an entity as a system, it is made up of a set of interdependent and co-finalized elements that are strategically coordinated and combined to achieve the overarching purpose or objectives of the entity. Each element System within the system plays a specific role, but their combined functionality is what People capital enables the entity to operate effectively and fulfill its mission. 29 Entity as a system Interdependence of Elements: The entity consists of multiple components—whether departments, processes, or resources—that rely on each other to function cohesively. Each part is interconnected and contributes to the overall system's performance. For example, in a corporate entity, departments such as marketing, finance, operations, and human resources depend on each other to achieve the company's goals. Marketing might generate demand, but without the finance team managing budgets or the operations team fulfilling orders, the system cannot deliver value. Co-finalization of Components: The elements within the entity are not only interdependent but also directed toward a common, final objective. Even though each component may perform distinct functions, they are all aligned with the overall purpose of the entity. For instance, in a non-profit organization, fundraising, outreach programs, and community services may have different day-to-day responsibilities, but all these elements share the goal of advancing the organization’s mission, such as alleviating poverty or promoting education. PAGE 30 Entity as a system Coordination of Functions: For an entity to operate as an effective system, its components must be well-coordinated. Proper coordination ensures that the actions and outputs of one element support and enhance the activities of others, leading to a smooth and efficient operation. In a hospital, for instance, the coordination between doctors, nurses, administrative staff, and technical equipment is crucial. If patient care, medical records, and treatment protocols are not aligned, the system could break down, affecting service delivery. Combination into a Unified System: The successful combination of these interdependent and co-finalized elements forms a unified system that works towards achieving the entity’s goals. The interaction between these components transforms them from individual elements into a cohesive unit capable of achieving complex outcomes. For example, in a tech company, the research and development (R&D), product design, and customer support teams must work together to innovate, create, and maintain successful products. Without the combination of these functions, the entity wouldn’t be able to deliver a competitive and valuable product to the market. PAGE 31 The fundamental characteristics of an entity Autonomy Long lasting System coordination of the factors Economic balance 32  Autonomy Autonomy Autonomy refers to the ability of the entity to operate independently and self-sufficiently, making decisions and controlling its own actions within its environment. An autonomous system can regulate its internal processes, manage resources, and respond to external changes without complete dependence on external inputs or control. Internal decision-making: The entity has control over its internal operations, allowing it to establish strategies, policies, and workflows that align with its objectives. For instance, a company can decide on its product development strategy or marketing approach without external interference Adaptation to external environment: While autonomous, the entity still needs to interact with its external environment—customers, suppliers, regulators, etc. Autonomy enables the entity to respond flexibly to changes, such as new regulations or market shifts, while maintaining its integrity and purpose.Example: A small business demonstrates autonomy by managing its production processes, staffing, and customer service independently. Although it may rely on external factors like suppliers, it ultimately makes independent decisions about how to operate and grow its business. PAGE 33  Long term balance Long-Term Balance Long-term balance refers to the entity’s ability to maintain stability and resilience over time, ensuring that it can sustain itself in the future. It involves managing resources, processes, and goals in a way that ensures ongoing viability. Sustainability: The system must balance short-term performance with long-term needs. This includes avoiding over-exploitation of resources, maintaining employee satisfaction, and ensuring continuous innovation. An entity that focuses only on immediate gains without considering the future risks compromising its longevity. Resilience to challenges: A system must have the ability to withstand and adapt to external shocks— whether economic downturns, technological disruptions, or shifts in consumer preferences. Long-term balance ensures the entity is prepared to weather these challenges without losing its core functionality. Example: A university maintains long-term balance by investing in infrastructure, research, and faculty development while ensuring student enrollment and financial sustainability. It doesn’t sacrifice future educational quality for short-term gains like reducing funding for research programs. PAGE 34  Economic Balance Economic balance involves maintaining a healthy financial position that ensures the entity can continue operating without running into deficits or financial collapse. For an entity, this means aligning its revenue and expenditure, ensuring that it generates sufficient resources to cover its costs and reinvest in growth or sustainability. Cost- effectiveness (economic efficiency): The entity must generate enough income (whether through sales, donations, grants, or other means) to cover its operational expenses. This includes balancing wages, operational costs, and investment in future growth with the revenue streams available. Efficient resource allocation (efficiency) : Economic balance also requires the entity to use its financial and physical resources wisely. This includes managing costs, reducing waste, and ensuring that investments yield long-term benefits rather than only short-term returns. Efficacy (Profitability for businesses): For commercial entities, maintaining economic balance usually includes generating a profit. However, for non-profits or government entities, economic balance may focus more on ensuring that revenues cover costs to support continuous operations. Example: A non-profit organization achieves economic balance by ensuring that its donations and grants cover its program costs, staff salaries, and operational expenses. It may also allocate a portion of its funds to build a reserve, ensuring the organization's sustainability in lean times. PAGE 35  Economic Balance Interconnection of These Characteristics These three characteristics—autonomy, long-term balance, and economic balance—are deeply interconnected: Autonomy is only possible if an entity can achieve economic balance. Without stable finances, the entity may become dependent on external funding or control. Long-term balance depends on both autonomy and economic balance. The ability to make independent decisions and manage resources effectively ensures that the entity can sustain itself over time. Economic balance is essential for achieving long-term balance, as financial instability can undermine the entity’s future, leading to short-term thinking and potential collapse. Together, these characteristics ensure that an entity functions as a well-integrated system, capable of sustaining itself, making independent decisions, and thriving in both the short and long term. PAGE 36 Classification of the entities Qualitative and quantitative criteria Dimension Main object of the production Sector Aim Public or private 37  Dimensions Small, medium and large entities based on different criteria such as revenues or turnover, workforce, capital invested etc. Large Market Medium Small 38  Classification on the base of the Sector Primary sector.. agricocultural and equivalent, extractive companies Seconday sector industrial production Third sector –Trade and exchange –service 39  Companies classifications: Aim ⚫ Profit ⚫ Cooperative ⚫ No profit (ONLUS) 40  Public or private Public company A public entity is an organization or ⚫ even if the legal form is body providing services to the public private the main on behalf of the government or economic agent is an another public entity. The public organization providing service and its employees are services to public on examples of public entities behalf the governament 41 Recap Economic Problem: People have unlimited needs and wants, but the resources to satisfy them are limited. This disparity creates the need for businesses to optimize resource use. Businesses as Solutions: A business, or azienda, is an organized effort that coordinates resources to produce goods or services efficiently, addressing the economic problem. Through economic activity, businesses help allocate scarce resources effectively. PAGE 42 Business A business is an entity that coordinates resources to meet specific economic objectives. Core Aspects of a Business: It organizes material, immaterial, and human resources. A business is dynamic, adjusting to the inputs it receives from the external environment and delivering outputs to the market or society. PAGE 43  Purpose and Object Production businesses create goods/services for the market (e.g., manufacturing firms). Consumption businesses focus on meeting the needs of specific groups (e.g., public organizations like governments). Legal Structure: Public (government-owned) or private (individual or collective ownership). Geographical Scope: Some businesses operate across multiple locations, while others are localized. Type of Activities: Primary (agriculture), secondary (manufacturing), or tertiary (services) sectors. PAGE 44 What is the primary reason for the existence of businesses? A) To maximize the use of unlimited resources B) To solve the economic problem of limited resources C) To meet governmental demands D) To create social networks PAGE 45 Which of the following best describes "systemic coordination" in a business? A) Combining resources to achieve multiple goals B) Coordinating various resources to work toward a single objective C) Ensuring resources are only used by individual departments D) Operating without regard to external inputs PAGE 46 What does the dynamic nature of a business refer to? A) A business always remains static B) A business avoids change and remains stable C) A business never changes its strategies D) A business constantly adapts to inputs and outputs from its environment PAGE 47 Which of the following is not a factor used to classify a business? A) Type of employees hired B) Purpose and object of the business C) Legal nature of the business entity D) The space in which the business operates PAGE 48 Upload imagine about types of productions PAGE 49 Companies can be categorized into three types based on their production processes: Classification: Direct Production Companies Indirect Production Companies Service Production Companies PAGE 50  Direct Production Companies Definition: Companies that physically manufacture goods. Process: Start with raw materials and utilize machinery and labor to create finished products. Examples: Clothing manufacturers Shoe production companies Automobile manufacturers PAGE 51  Indirect Production Companies Definition: Companies that enhance the utility of existing goods and facilitate their exchange. Key Point: Focus on transforming goods rather than creating them from raw materials. Examples: Wholesale and retail trade companies (mercantile enterprises) PAGE 52  Service Production Companies Definition: Companies that provide services supporting direct and indirect production activities. Examples: Transportation services Cleaning service providers Banks and insurance companies PAGE 53  Economic Sectors of Production Companies Primary sector: Involves the extraction or use of natural resources (e.g., agriculture, mining, fishing). Secondary sector: Involves manufacturing goods using resources from the primary sector. Tertiary sector: Offers intangible goods and services to consumers. Quaternary sector: Focuses on knowledge economy, education, and research and development. Quinary sector: Not well-defined but may involve virtual or digital service PAGE 54 What is the primary function of direct production companies? A) Enhance the utility of existing goods B) Provide services to support production C) Physically manufacture goods from raw materials D) Distribute goods to consumers PAGE 55