101 BUS Study Guide
BUS 101 Course Summary
Owners
Create Value Suppliers
Manage Human Capital
Acquire Financial Capital
Customers
Acquire Customers
Employees
Case Analysis: 1. Stakeholders (big groups and name) a. Society if (If they can go somewhere put them there) i. Environmental ii. Potential Employee iii. No where else to put them 2. Stakes 3. Who is more important a. Legitimacy i. Ownership ii. Legal right (law) iii. Moral right (big 12) iv. Interest = no legitimacy b. Power = the ability to influence the decision (money, public opinion, political power, own a lot of shares) i. If you do something illegal you lose power ii. If you do something ethically wrong you usually lose power c. Urgency = Want to influence (you need to do something to have urgency) d. Classification i. Core = 3/3, Strategic = 2/3, Secondary = 0-1/3
4. Perspectives of Stakeholders a. Economic (financial impact; about money) b. Legal (law broken, name it) c. Ethical (legal yet unfair, Big 12) 5. (Case Analysis Continued) 1. Impact on 4 Business Processes (Internal) a. Acquiring Customers (MKT) i. Needs to change one of the 4 Ps/Cs of marketing 1. Product (Customer), 2. Price (Cost), 3. Promotions (Communication) 4. Place (Convenience) b. Acquiring Financial Capital (FIN/ACC) i. Debt and Equity financing ii. Financial Impact, Cost and Risk iii. Wrong financial statements c. Managing Human Resources (HR) i. Hiring / Firing ii. Retaining the best employees, people management issues d. Creating Value (OPS) i. Raw Materials from Suppliers 1. Processes and specifications to transform inputs from suppliers into more valuable products and services to be sold to customers. 2. Ways to internally reduce costs or improve quality. ii. Strategic Hierarchy Connections 1. Corporate Strategy a. What business are we in 2. Business Strategy a. How to beat the competition (3 ways) i. Differentiation 1. (Fastest) new ideas that other people havent done 2. The first person is NOT in trouble with anti-trust laws (Patent protects you) ii. Cost 1. Big company low cost (Wal-Mart) iii. Focus 1. Small market that not many people are in 2. (The guy who makes springs for pens) 3. Functional Strategy a. Operations: i. Structural (bricks and mortar) ii. Infrastructural (People & Processes) 1. High skilled high cost workers or low skill low cost iii. Technology Strategy (Automation) CRITICAL THINKING 1. 5 stages of critical thinking a. Confused Fact-finder i. Looks for one correct answer ii. Doesnt seem to get it 2
iii. What feels right b. Biased Jumper i. Stacks information to support their conclusion ii. Acknowledges other points but ignores other opinions iii. Evidence logically supports points iv. Jumps to conclusions c. Perpetual analyzer i. Establishes a balanced view of points (never makes a decision) ii. Views from multiple perspectives iii. Unable to establish a dominant viewpoint (ex. Writes a long paper with no thesis) d. Pragmatic performer i. Goal formed with well founded conclusion ii. After through research, prioritizes information iii. Incorporates others in the decision iv. No long-term thought e. Strategic Re-Visioner i. Constructs knowledge and move towards better conclusions over time ii. Establishes a long-term vision with contingencies iii. Anticipates what will happen, and decides how to gather information before 2. Know how they apply to our stakeholder business decision making model. 3. Understand the importance of critical thinking in business decision making. INTRODUCTION TO BUSINESS 1. MILTON FREIDMAN VS EDWARD FREEMAN a. Friedman i. Its about making profits for the owners b. Freeman i. You must consider all the stakeholders to be successful in business 2. Understand the global nature of todays business environment. a. The business world is changing b. We need a broader perspective i. Languages, culture, politics, economics 3. Key Business Facts to help you figure things out. a. How much profit do companies make i. 2-3% b. How many people are there in your markets (US, World) i. U.S. 300 Million ii. World 6.8 billion iii. China 1.3 billion iv. India (2020) 1.4 billion c. Size of the U.S. GDP i. 14 Trillion d. Know the difference between thousands, millions, billions, and trillions. i. Trillions = GDP ii. Billions = Companies yearly sales iii. Millions = Companies daily sales 4. Business organizations and their advantages and disadvantages: a. Sole proprietorship i. Advantages 1. Easy to start 2. Simple tax rules 3
ii. Disadvantages 1. Unlimited liability 2. Limited resources 3. Limited growth potential b. Partnership i. Advantages 1. No special taxes 2. More resources (financial/talent) 3. Share the load/ longer survival ii. Disadvantages 1. Unlimited Liability 2. Split of profits 3. Potential Disagreements 4. Exit conditions iii. General (must have a general partner) 1. Manages the firm 2. Full liability (can lose everything) iv. Limited 1. Silent partner 2. Can only lose what you invest c. Corporation i. Signs Articles of Incorporation in a state (legal entity) ii. Advantages 1. Limited liability (no person is sued, the entity is sued) 2. Access to $$$ 3. Ease of ownership transfer 4. Separation of ownership from management iii. Disadvantages 1. More costly to form 2. Must keep accurate financial records 3. Potential conflict with board of directors 4. Taxed twice with dividends 5. Separation of ownership from management 5. Adam Smiths Invisible hand a. Competition 6. Limited liability Can only lose what you put in
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BUSINESS ETHICS 1. Understand the significance and pervasiveness of ethical considerations in business. 2. Lessons of the Grab Game and the Voting Game. a. You win in the short term but lose overall b. Everyone needs to work together for the better of the group c. There are implications to ones actions, unethical behavior is self-defeating 3. Know Blanchard & Peales three ethical check questions and how to use them. a. Is it legal b. Does it seem fair c. How does it make me feel about myself? 4. Understand the definitions and how to apply the Big 12 Ethical Issues. LEGAL FRAMEWORK FOR BUSINESS 1. Understand the legal context of business decisions. 2. 4 Laws a. Contract 1. Voluntary offer and acceptance 2. Legal Purpose 3. Consideration (mutually beneficial, NOT A GIFT) 4. Competency (legal age/no mental illnesses) b. Fiduciary 1. Principal 1. Indemnification (protect the agent if something goes wrong) 2. Reimbursement (cover any out of pocket expenses) 2. Agent/Fiduciary works in the best interest of the principal 3. EXAMPLES (principal/fiduciary) 1. Investor/portfolio manager 2. Employer/employee 3. Corporation/corporate director or officer 4. Shareholder/corporate directors 5. Client/accountant c. Tort 1. Strict tort liability 1. If you hurt someone you need to make it up to them and anyone who was involved in making the product is responsible d. Statutory / Regulatory 3. Sarbanes- Oxley (protect owners/investors) a. Auditor Independence b. Corporate Governance c. Enhanced Financial Disclosure d. Protects whistleblowers 4. Civil Rights Act of 1964 to protect Employees a. Protects groups that were traditionally discriminated against 1. Race creed color sex nationality 5. At-Will Doctrine and Limits to the at will doctrine a. Gives a company the right to fire you without reason b. Three exceptions 1. Public Policy 1. Refusing to do something illegal 2. Breech of contract 5
1. 12% of people have contracts 3. Breech of good faith 1. (Fairness) if everyone is doing something and you are the only one who gets singled out for it. (META model employee termination act) 6. Anti-Trust Law a. Note: if you are the first to come up with a new idea that is not anti-trust (anti-trust is existing competitors working together) a. Protect consumers by insuring competition i. Doesnt allow competitors to work together to set prices b. Prevents monopolies ADVANCED STAKEHOLDER THEORY 1. Stake- an interest or share in an undertaking 2. Stakeholder- an individual or group that has a stake in the organization 3. Know the stakeholder matrix 4. Stakeholder Management Questions a. Who are our stakeholders (stakeholder identification) b. What are your stakeholders Stakes c. What Opportunities and challenges do our stakeholders present to the firm d. What responsibilities (economic, legal, ethical) does the firm have 5. Approches to stakeholder theory: a. Strategic Approach i. Views stakeholders as a factor to be take into consideration and managed while pursuing profits for shareholders
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b. Multifeduciary Approach i. Management has a fiduciary responsibility to stakeholders just as it has the same responsibility to shareholders c. Stakeholder Synthesis Approach i. They have obligations to stakeholders but not seen as fiduciary responsibilities d. Production view (top) e. Managerial view (bottom)
i. f. Stakeholder view
i. 6. Discuss responsibilities of and to stakeholders. OWNER/INVESTOR ISSUES & SOX 1. Understand business owners as a stakeholder.
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a. Corporate Governance (Owners/Non-owners) (how a company governs itself) i. Charter Shareholders Board of Directors Top Management (CEO, CFO, etc) Management Employees b. The Agency Problem (issues of separation of ownership and control) i. Agents should act for the principal ii. Problems (agents act in there best interest) 1. Excessive perks 2. Shirking (avoiding responsibilities) c. Clarify the role of the board of directors i. Hire the upper management d. How to improve the function of the board of directors. i. Change the board 1. Outside directors (not employed by company) 2. Independent directors (not employed by the company, not doing business with the company, no relatives working for the company) 3. Stronger board committees 4. Diversity ii. Establish board committees 1. Audit 2. Nominating 3. Compensation iii. Build a better board 1. Define the role of the board 2. Have explicit financial goals 3. Broaden the talent of the directors 4. Encourage constructive disputes e. The role of government in protecting owners interests. i. Providing more complete, clear information about the financial health of publically traded companies (SOX Act of 2002) 2. How does the Sarbanes-Oxley Act affect corporate a. governance. Limits non-auditing services of auditors b. Enhances financial disclosure c. CEOs and CFOs certify financials d. Protects whistleblowers e. Code of ethics disclosure f. Government regulation to protect owners by providing more complete, transparent information about the financial health of publically traded companies 3. Explain why organizations need financial capital a. To fund there business 4. Identify sources of funds and advantages and disadvantages of both: a. Debt
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i. Getting a loan ii. Borrowing money iii. Advantages 1. Tax deductibility of interest 2. Doesnt dilute control of the firm 3. Lower cost of funds (CHEAPER) iv. Disadvantages 1. Increased probability of financial distress 2. Use up potential debt capacity b. Equity i. Take on a partner ii. Form a corporation and sell shares 1. Shareholders (stockholders, investors, owners) a. Limited liability (only lose what you put in) b. Voting rights (common) (NOT when you get preferred) iii. (Riskier are paid last and there for more expensive) iv. Net income = retained earnings 5. Types of financial statements a. Balance Sheet i. Assets = Liabilities + Equity ii. What you own = What you owe + what you owe yourself iii. Stuff = other peoples claims to that stuff + your claim to that stuff b. Income Statement i. Sales Expenses = Profit (net income) ii. Calculates Net Income then closed into retained earnings c. Cash Flow i. $ From operations +/- investments +/- Financing ii. How much cash your cash by 6. Information in the Financing and Risk Q&A article. 7. See Case Analysis, Business Processes Acquiring Financial Capital CUSTOMERS & ACQUIRING CUSTOMERS 1. Understand Customers as stakeholders 2. Distinguish between final customers a. Business 2 business (use for businesses) IBM buys Intel chips i. Strategic decision making b. Business 2 customer (mom buys groceries) i. Based on emotions 3. Government protecting customers c. Encourage competition i. Pricing ii. Advertising d. Regulatory agencies i. Food and Drug Administration (FDA) ii. Federal Trade Commission (FTC) i. Consumer Product Safety Commission
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4. How to market (four Ps goods) (four cs goods + service) (Dont worry about the letters know the definitions) i. Product (consumer) 1. Target 2. Competition 3. Mens/women a. Style b. Packaging c. Weight ii. Price (cost) 1. Price: How much to charge a. Pricing Strategies i. Penetration - Low Price Leader (heavy competition) 1. OFFER NEW PRODUCT AT THE LOWEST PRICE 2. Loss Leader a. Take a loss on some items to get customer to spend more in total 3. (Example Wal-Mart) ii. Skimming High then Lower (Little competition) 1. MAXIMIZE PROFITS FOR THE SHORT TERM. 2. WORKS ONLY FOR UNIQUE PRODUCTS a. High demand b. No immediate competition iii. Premium High to indicate quality 2. Cost : (Total price to take ownership bigger concept) iii. Placement (convenience) 1. Where to sell 2. Timing iv. Promotion (communication) 1. Four parts of a promotional mix a. How you communicate to consumers i. Personal selling 1. Face to face ii. PR 1. Good press iii. Product promotion 1. Displays iv. Advertising 1. Paying media 5. Market/customer-oriented vs. sales/production-oriented e. Market/customer i. Defined in terms of Benefits sought by the customer: 1. Target Market 2. Customer Needs 3. Communicate both ways ii. Long-Term Profits through Customer Satisfaction 1. The internet is the key to this change. a. Information has shifted power from the seller to the buyer 10
f. Sales/Production i. Defined in terms of products and sales: 1. Factory 2. Products 3. Sell & Promote ii. Short-Term Profits through Sales Volume 6. Product Life Cycle (PLC) a. Development stage i. No sales, profits, or competitors (hasnt been put out yet) b. Introductory stage c. Growth stage d. Maturity stage e. Decline stage f. Sales, profitability, competition all differs, depending on stage of PLC. i. Each stage has a different mix of the 4 Ps: product design, pricing changes, placement assessment, and new promotion strategies
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h. i. Relations to Customers i. Value = Benefits / Costs; value differs for every customer ii. Price does not always equal cost! iii. Customer satisfaction Meeting the expectations of the customer with something of value iv. Relationships Provide the opportunities to create ongoing value for customers and profit for the marketing organization 7. See Case Analysis Business Processes - Acquiring Customers EMPLOYEES & MANAGING HUMAN CAPITAL
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1. Employee rights a. Statutory rights (government laws) b. Collective bargaining rights (union contracts) c. Enterprise rights (promises from the business) 2. 3. Governments role in protecting employees a. The law that most effects employees i. Regulatory / statutory b. Statutory Laws i. Civil Rights Act (1964) 1. Protects groups that have traditionally been discriminate against a. Race, Creed, Color, Nationality, Sex ii. Age Discrimination Act (1967) iii. Equal Employment Opportunity Act (1972) 1. Affirmative Action iv. Americans with Disabilities Act (1990) 4. Employment-At-Will doctrine a. You can fire someone without reason (this is changing) b. 3 Exceptions i. Public Policy 1. Refusal to do something illegal ii. Contracts 1. Only 12% of people have contracts iii. Breech of good faith by the employer 1. Fairness- you are the only one singled out 2. Were you aware of the policy and consequences? 3. Did you have a chance to explain your side of the story? 4. Is it a frivolous policy and did you really did anything wrong? 5. How were other employees disciplined for similar violations? 6. Was the policy in place before or after you violated it (the Barry Bonds escape clause)? c. Model Employee Termination Act (META) i. Must show good cause for firing someone (only adopted in some states) 5. Due process a. The government must respect all of a person's legal rights when the government deprives a person of life, liberty, or property b. Includes an individual's right to be adequately notified of charges or proceedings, and the opportunity to be heard at these proceedings c. Alternative dispute resolution i. Hearing Procedure 1. Allows employees to be represented by an lawyer or neutral party ii. Ombudsman 1. A troubleshooter helps to investigate and reach settlements for employee complaints iii. Peer Review Panel 1. Fellow workers come together and review a situation 6. Whistle Blowers a. Elements i. Whistle blower ii. Complaint 12
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iii. The party the complaint is about iv. The organization against which the complaint is made b. Sarbanes- Oxley (whistle blower protection) i. Protection for harassment ii. Timely responses iii. The right to a jury trial iv. Lessened burden of proof on employee v. Compensation for judicial fees vi. Criminal felony penalties for retaliation HR responsibilities a.
8. a. Administrative is shrinking and strategic is growing 9. Where to get interviewing information a. Library i. Business source complete ii. Hoover iii. Marketline 10. Point of the dancer example a. People are highly different resources i. They can look at the same thing differently ii. Managers need to see multiple perspectives iii. Not just about what you see first 11. (See Case Analysis business process) 12. Three roles of hr a. Operational b. Associate advocate (gets the best employees (evaluating)) c. Administrative gotten smaller (payroll, government reporting, legal compliance, paperwork) d. Strategic got larger (planning the future) e. Examples i. Discuss the company succession plan who does that deal with? 1. Strategic ii. Plan compensation budgets? 1. Strategic planning into the future 13
SUPPLIERS & CREATING VALUE (lowering costs increasing quality) 1. Understand suppliers as stakeholders. 2. Operations management a. Converting inputs from suppliers to outputs for consumers and creating value. 3. What role does government play in protecting suppliers interests. a. None the suppliers are protected by contracts 4. Understand the difference between supply chain management and operations management. a. Supply chain management is bigger i. Suppliers, buy products to help make your product ii. Buy other things for after making (trucks to ship, a store to carry product mars giving candy to Kroger) b. Operations management i. Inputs => consumers ii. Inside (make it) 5. Know how the Make vs. Buy decision impacts the supply chain. a. Whether they will make their products onsite or buy from a supplier 6. Know the Strategic and Functional hierarchy. a. Corporate strategy i. What business are we in? b. Business Strategy i. Cost leadership 1. Low cost leaders 2. Big companies (Wal-mart) ii. Differentiation 1. Unique product features 2. Quality, high cost to produce (Apple iPod) iii. Focus 1. Small market, niche 2. May have low cost, high differentiation, or both c. Functional Strategy (capabilities what / Process how) i. Structural 1. (Supply chain) make/buy 2. Facility location 3. Facility Layout a. Product oriented i. High volume/low cost ii. Assembly line (not flexible) iii. Product is made then order is placed 1. Beer bottling plant (made to stock) b. Process oriented i. Low volume (more flexible) ii. Order is placed then product is made 1. Kitchen (made to order) 4. Materials required in planning ii. Infrastructure 1. Purchasing 2. J-I-T (inventory control) 3. Quality control 4. Labor force 14
a. High-skilled workers/high cost or low-skilled/low cost 7. Understand how the supply chain is an integrating force across functions. 8. See Case Analysis Business Processes Creating Value
EXTRA: If you are low cost what kind of layout do you have for your factory o Low cost, product oriented layout, assembly line (some variation)/continuous line (no variability) o Differentiation Process layout, customization, everything is unique Make the order first then build the product o Focus Product or process layout depending on the niche NEVER ASSUME LAWS IN INTERNATIONAL CASES KNOWLEDE IS POWER MANAGING HUMAN RESOURCES = employee safety Know if the board of directors are inside/outside dependent/independent Decision Maker VS.: o Owner- C, F, R o Employee- R, sometimes C o Customer- C, T, R o Suppliers- C o Competitors- R o Society- R
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