AEM1200_0903ToPost - AEM220, Introduction to Business...

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Unformatted text preview: AEM220, Introduction to Business Management AEM220, Wednesday 9/03 Business and the Business Environment What is business? Profits, risk and business Corporate social responsibility What is business? What Activity seeking profit Activity profit Provides goods/services Satisfy standard of living- quality of life Objectives of Business Objectives Survival Growth Profit Social Social Responsibility Responsibility Why Profit? Why As long as people are free to engage with each As other in voluntary economic transaction, the selfother iinterest of people (and companies) results in nterest public benefit; public Greed and self interest are two different things! Monopolies also hurt economic freedom; Distorted prices may result in net Distorted impoverishment. impoverishment. The Five Factors of Production The Profit and Risk Profit Revenue – Expense = Profit (Loss); The higher the risk, the higher the probability of The losing a large amount of money; amount Investment of factors/resources/capital will occur Investment only if there is a equally large or larger only probability of winning a large amount of money. winning Risk vs. Uncertainty Risk Risk Known likelihood of losing a large amount of money; money; Known unknown Uncertainty Unknown likelihood of losing a large amount Unknown of money; of Unknown unknown Forms of Participation in a Business Enterprise Forms Entrepreneurship An entrepreneur is a person who risks time and An entrepreneur money to start and manage a business money Personal Institutional Ownership Employment Others Customer Supplier Government Business Stakeholders Business Stockholders Bankers Suppliers Government Employees Dealers and retailers Activists and environmentalists Community Customers Etc, etc, etc Key Distinctions between Shareholder and Stakeholder Firms Stakeholder Attibute Goals Shareholder Firm Stakeholder firm Maximize shareholder wealth Pursue multiple objectives of parties with different interests Managers are agents of shareholders; control is the key task. Shareholder value sufficient to maintain investor commitment. Shareholders Investors / owners Coordination, cooperation, conflict resolution are key tasks. Fair distribution of value created to maintain commitment of multiple stakeholders. All stakeholders All stakeholders Governance structures and key processes Performance metrics Residual risk holders Stakeholder influence Sustainability Sustainability Meeting the needs of the present Meeting generation without compromising the ability of future generations to meet their own needs. Brundtland Commission, 1987. Brundtland Corporate social responsibility Corporate Refers to the comprehensive approach that a Refers corporation takes to meet or exceed stakeholder expectations beyond measures of revenue, profit and legal obligation. community investment, community human rights and employee relations, human environmental practices ethical conduct. ethical Profits Environmental sustainability Social responsibility But, can it all be measured? And is the economy But, really so static? really The Triple Bottom Line The The Stakeholder Corporation and CSR: a critique and There is one and only one social responsibility of There business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. without Milton Friedman – Nobel laureate Some References Some The Economist, “Survey on Corporate Social The Responsibility”, January 22, 2005 Responsibility”, Kochan and Rubinstein, “Towards a Stakeholder Kochan Theory of the Firm: The Saturn Partnership”, Organization Science, 11(4):367-386, 2000 Organization Take-aways Take-aways Businesses are organizations oriented towards Businesses offering products and services with the objectives of surviving, growing, and serving the public while making a profit; public The main difference in resource utilization and The modes of participation in business activities is the level of risk associated with the business; the Business obtains resources and legitimacy from Business society, and it is therefore responsible to it. society, ...
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