The Business Firm
Company: An organization that sells goods or services in order to make money. An organization that ‘socially’ performs industrial,
commercial, or service activities.
Aims:
a) Satisfying the needs and wishes of people in general by offering products and services.
b) Satisfy the stakeholders: generate profits (salaries and benefits); aspirations and realization
For this, it uses tangible and intangible resources
Tangible resources
+ Raw materials and components: Products purchased from suppliers for production or as support material.
+ Humans: Physical / mental abilities and the effort of the people.
+ Financial: Funds needed to acquire the necessary natural and human resources.
Intangible resources: Examples of intangible assets include goodwill, brand recognition, copyrights, patents, trademarks, trade
names, and customer lists. You can divide intangible assets into two categories: intellectual property and goodwill.
Types of firms
Criteria to classify different types of companies: Activity, Legal entity types, Ownership, Size.
Factors that determine the size of a business: Size of capital, number of employees, volume of sales, level of technology, raw
materials used, legal form of ownership.
The Size of a business matters because this classification impacts for: Government support, tax incentives, accounting obligations,
labor force requirements
A firm can be efficient by making the best use of people, money, physical plant, and technology. It is ineffective if its goals do not
provide a sustained competitive advantage
Values, Vision, Mission and Objectives of the firm
The role of values: These values constrain, augment, and even transcend the fundamental requirement of profitability, the values
can help build relationships with other with whom it does business.
,Core values together with the mission form an organization’s core ideology, which defines an organization's timeless character and
is the glue that holds together the organization Vision: Core ideology + Envisioned future
Vision vs BHAG’s
A BHAG (big hairy audacious goal) is a transformative, long term goal (10-25 years) that inspires and challenges an organization,
pushing it beyond its current limits towards an ambitious vision
Types of BHAG’s: Target-oriented, competitive, role model internal transformation
Vision: Articulation of what the company wishes to become or where it seeks to go. The vision focuses on tomorrow and what the
organization wants to become
Mission: Statement of corporate purpose and often defines the business area in which it competes, the mission focuses on today
and what the organization does.
Aims and objectives
+ Profit: Surplus of the income obtained by the sales of the products and services of the companies on the costs that caused them
to produce and sell them.
+ Balanced Budget: Situation in financial planning or the budgeting process where total revenues are equal to or greater than total
expenses.
+ Efficiency: The comparison of what is actually produced or performed with what can be achieved with the same consumption of
resources.
+ Effectiveness: The degree to which objectives are achieved and the extent to which targeted problems are solved
+ Aspects of Social Responsibility: Production (products), Human Resources (human development), Finance (financial
sustainability), Wealth Creation
+ Economic aims: profits, dividends
+ Financial aims: liquidity, balanced debts
+ Technical aims: productivity, quality
+ Social aims: favorable image, environmentally friendly
+ Growth: growth rate, market share, etc.
The organization
, The organization
Internal Stakeholders: Stakeholders, employees, managers, board members
External Stakeholders: Customers, Suppliers, Creditors, Governments, General public
Management
Management is the process of coordinating resources to achieve maximum productivity, quality, effectiveness, efficiency, and
competitiveness, thereby meeting an organization's objectives.
Levels of management
1.- Strategic Managers:The firm’s senior executives are responsible for the firm as a whole. Concerned primarily with the interaction
between the organization and its external environment.
•Developing the company’s goals
•Focus on long-term issues
•Emphasize the growth and overall effectiveness of the organization
2.- Tactical Managers: Responsible for translating the general goals and plans developed by strategic managers into specific
objectives and activities. These are middle managers.
•Shorter time horizon
•Coordination of resources
3.- Operational Managers: Lower-level managers supervise the organization’s operations. Directly involved with non-management
employees.
em
•Implementing the specific plans developed with tactical managers.
•This is a critical role to the organization.
•Operational managers are the link between management and non-management staff.
Administrative Process
+ Planning: The management function is to set future objectives and map out the activities necessary to achieve them. To be
effective, the objectives of individuals, teams, and management should be coordinated to support the firm’s mission.
+ Organizing: The management function that determines how the firm’s resources are arranged and coordinated to achieve
strategic goals.
+ Leading: The management function that energizes people to contribute their best, individually and in cooperation with others.
+ Controlling: The management function that measures performance, compares it to objectives, implements necessary changes, and
monitors progress.
Company: An organization that sells goods or services in order to make money. An organization that ‘socially’ performs industrial,
commercial, or service activities.
Aims:
a) Satisfying the needs and wishes of people in general by offering products and services.
b) Satisfy the stakeholders: generate profits (salaries and benefits); aspirations and realization
For this, it uses tangible and intangible resources
Tangible resources
+ Raw materials and components: Products purchased from suppliers for production or as support material.
+ Humans: Physical / mental abilities and the effort of the people.
+ Financial: Funds needed to acquire the necessary natural and human resources.
Intangible resources: Examples of intangible assets include goodwill, brand recognition, copyrights, patents, trademarks, trade
names, and customer lists. You can divide intangible assets into two categories: intellectual property and goodwill.
Types of firms
Criteria to classify different types of companies: Activity, Legal entity types, Ownership, Size.
Factors that determine the size of a business: Size of capital, number of employees, volume of sales, level of technology, raw
materials used, legal form of ownership.
The Size of a business matters because this classification impacts for: Government support, tax incentives, accounting obligations,
labor force requirements
A firm can be efficient by making the best use of people, money, physical plant, and technology. It is ineffective if its goals do not
provide a sustained competitive advantage
Values, Vision, Mission and Objectives of the firm
The role of values: These values constrain, augment, and even transcend the fundamental requirement of profitability, the values
can help build relationships with other with whom it does business.
,Core values together with the mission form an organization’s core ideology, which defines an organization's timeless character and
is the glue that holds together the organization Vision: Core ideology + Envisioned future
Vision vs BHAG’s
A BHAG (big hairy audacious goal) is a transformative, long term goal (10-25 years) that inspires and challenges an organization,
pushing it beyond its current limits towards an ambitious vision
Types of BHAG’s: Target-oriented, competitive, role model internal transformation
Vision: Articulation of what the company wishes to become or where it seeks to go. The vision focuses on tomorrow and what the
organization wants to become
Mission: Statement of corporate purpose and often defines the business area in which it competes, the mission focuses on today
and what the organization does.
Aims and objectives
+ Profit: Surplus of the income obtained by the sales of the products and services of the companies on the costs that caused them
to produce and sell them.
+ Balanced Budget: Situation in financial planning or the budgeting process where total revenues are equal to or greater than total
expenses.
+ Efficiency: The comparison of what is actually produced or performed with what can be achieved with the same consumption of
resources.
+ Effectiveness: The degree to which objectives are achieved and the extent to which targeted problems are solved
+ Aspects of Social Responsibility: Production (products), Human Resources (human development), Finance (financial
sustainability), Wealth Creation
+ Economic aims: profits, dividends
+ Financial aims: liquidity, balanced debts
+ Technical aims: productivity, quality
+ Social aims: favorable image, environmentally friendly
+ Growth: growth rate, market share, etc.
The organization
, The organization
Internal Stakeholders: Stakeholders, employees, managers, board members
External Stakeholders: Customers, Suppliers, Creditors, Governments, General public
Management
Management is the process of coordinating resources to achieve maximum productivity, quality, effectiveness, efficiency, and
competitiveness, thereby meeting an organization's objectives.
Levels of management
1.- Strategic Managers:The firm’s senior executives are responsible for the firm as a whole. Concerned primarily with the interaction
between the organization and its external environment.
•Developing the company’s goals
•Focus on long-term issues
•Emphasize the growth and overall effectiveness of the organization
2.- Tactical Managers: Responsible for translating the general goals and plans developed by strategic managers into specific
objectives and activities. These are middle managers.
•Shorter time horizon
•Coordination of resources
3.- Operational Managers: Lower-level managers supervise the organization’s operations. Directly involved with non-management
employees.
em
•Implementing the specific plans developed with tactical managers.
•This is a critical role to the organization.
•Operational managers are the link between management and non-management staff.
Administrative Process
+ Planning: The management function is to set future objectives and map out the activities necessary to achieve them. To be
effective, the objectives of individuals, teams, and management should be coordinated to support the firm’s mission.
+ Organizing: The management function that determines how the firm’s resources are arranged and coordinated to achieve
strategic goals.
+ Leading: The management function that energizes people to contribute their best, individually and in cooperation with others.
+ Controlling: The management function that measures performance, compares it to objectives, implements necessary changes, and
monitors progress.
