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AEM2200-0831ToPost - Department of Applied Economics and...

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Unformatted text preview: Department of Applied Economics and Management Management CORNELL UNIVERSITY AEM 2200 INTRODUCTION TO BUSINESS INTRODUCTION MANAGEMENT MANAGEMENT Pedro David Pérez Fall 2011 AEM1200, Introduction to Business Management AEM1200, Wednesday 8/31 What is business? What is business? Profits, risk and business What Entrepreneurship, the process and the Entrepreneurship, entrepreneur entrepreneur Conceptualizing the business environment and Conceptualizing its dynamic forces its 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 Functional Areas of Business Functional Operations Transformation of Transformation resources into goods and services; services; Marketing The process of The determining customers’ wants and needs and then providing those customers with products or services that match or exceed their expectations; exceed Finance The process of acquisition The of funds for a firm and management of this funds within the firm; within Others Human resources Research and development Public relations Legal Etc… 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 Ownership Personal Institutional Employment Others Customer Supplier Government What is an entrepreneur? from the French entreprendre , meaning to undertake undertake one who organizes, manages, and assumes the one risks of a business or enterprise Entrepreneurship Entrepreneurship Accepting the risk of starting and running a business. Key Activities Identifying an opportunity Exploiting or developing this opportunity Running a new business successfully Intrapreneurs accept the risk of starting and running a Intrapreneurs venture inside a business business The Process Recognition of an opportunity Deciding to proceed and assembling resources Launching a new venture Building success Harvesting the rewards Entrepreneurial attitudes s Self-Directed & Self-Disciplined s Self-Nurturing s Action-Oriented s Highly Energetic s Tolerant of Uncertainty Three Key Processes Idea generation Use existing knowledge gained (and retained) from experience to generate something new—thoughts they did not have before. Creativity Items or ideas produced are both Novel (original, unexpected) Appropriate or useful Opportunity recognition Better access to certain kinds of information Ability to utilize the information Capital sources of successful entrepreneurs Personal savings Friends and family Partners Credit cards Bank loans Angels and venture capital Business Environment Business Components of the Environment Components Economy Growing vs. shrinking Growing economies economies Predicting future Predicting economic activity economic Business confidence Business indices indices Technological trends Sociocultural trends Demographic changes Changes in behavior, Changes attitudes, and beliefs attitudes, Political / Legal trends Political Legislation Regulations Court decisions Customers Reactive customer monitoring: Reactive responding to problems, trends, and events trends, Proactive customer monitoring: Proactive anticipating problems, trends, and events trends, Competition Who are your competitors? What are their likely courses of What action? action? What are their strengths and What weaknesses? weaknesses? Suppliers Relative independence Opportunistic vs. relationship Opportunistic behavior behavior Industry regulation Advocacy groups Characteristics of External Environments Environments Environmental change The rate at which a company’s environment changes; Punctuated equilibrium theory: Companies cycle through stable and dynamic environments. Environmental Complexity Number of external factors in the environment that affect organizations; Resource Scarcity Degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources. Uncertainty Uncertainty How does management keep track of the environment? How Environmental scanning Environmental Searching the environment for events or issues that might Searching affect an organization affect keeps companies current on industry factors reduces uncertainty alters organizational strategies contributes to organizational performance Looking for threats and opportunities Cognitive Maps Simplified models of external environments Depicts how managers believe environmental factors relate to Depicts possible organizational actions possible The Danger: To see only what we know how to see and The to find only what we are looking for. to Take Aways Business is any human activity that makes available a good or service to society with the objective of making a monetary profit; Entrepreneurship is the process of organizing, managing, and assuming the risk of starting and running a business; The business environment changes constantly and represents a source of threats and opportunities for both entrepreneurs and established businesses. ...
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