Sam
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
01
-‐
The
Firm
1. A
System
Environment
Boundary
A
company
can
be
modelled
as
a
system,
which
Inputs Transformation Outputs
converts
inputs
into
outputs,
and
is
affected
by
the
external
environment.
There
are
a
number
of
factors
of
production
• Natural
Resources
-‐
All
the
natural
resources
used
to
produce
goods
and
services,
including
raw
materials.
• Labour
-‐
The
time
and
resources
people
devote
to
producing
services
or
goods,
and
this
is
rewarded
with
wages.
• Capital
-‐
Is
used
to
buy
all
the
equipment,
buildings,
tools
and
other
manufactured
goods
or
services.
The
return
to
capital
or
the
payment
for
the
use
of
capital
is
interest
(generated
by
banks).
• Information
-‐
Information
is
rewarded
with
knowledge,
which
can
create
an
advantage
for
the
firm.
• Entrepreneurship
-‐
A
special
type
of
human
resource,
that
organises
the
other
3
factors
of
production,
makes
business
decisions,
innovates
and
bares
business
risks,
this
is
rewarded
with
profit.
This
is
the
same
as
the
theory
of
the
4
M’s
of
Operations
Management;
• MEN
• MATERIALS
• MONEY
• MACHINES
Companies
can
also
have
different
types
of
transformations;
• PHYSICAL
-‐
Manufacturing
• LOCATION
-‐
Transportation
• EXCHANGE
-‐
Retailing
• STORAGE
-‐
Warehousing
• PHYSIOLOGICAL
-‐
Health
Care
• INFORMATIONAL
-‐
Telecommunications
The
outputs
of
a
transformation
include
core
services
(delivers
what
the
customer
wants
correctly,
on
time
and
competitively
priced)
and
value-‐added
services
(builds
relationship
with
the
customer
and
is
more
difficult
for
competitors
to
copy):
1
,Sam
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
CORE
• Core
Products/Services
VALUE
ADDED
• Information
• Problem
Solving
• Sales
Support
• Field
Support
In
developed
countries,
firms
are
more
likely
to
be
competitive
if
they
provide
a
higher
proportion
of
value
added
services,
in
addition
to
the
core
product/service.
Inputs Transformation Outputs
Physical Core Services
Natural Resources Location Products or Services
Labour Exchange
Capital Storage Value-Added Services
Information Physiological Information
Entrepreneurship Informational Problem Solving
Sales Support
or Field Support
The 4 M s
2. The
Business
Environment
The
general
global
trend
for
businesses
is:
Developing
World
=
Goods
or
Products
Developed
World
=
Services
There
are
three
main
types
of
business:
• Sole
Trader
• Partnership
• Limited
Company
(Ltd
Co)
/
Public
Limited
Company
(PLC)
2
, Sam
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
There
are
three
levels
of
the
business
environment:
• Internal
Environment
o The
structure
and
politics
of
an
organisation
affect
the
manner
in
which
the
organisation
responds
to
environmental
change.
§ Marketing
§ Production
The macro-environment
§ Finance
Political/legal The micro-environment Economic
§ Personnel
forces forces
§ Research
&
Development
Suppliers
The internal
Customers
environment
• Micro-‐Environment
Marketing
Production
Finance
o Organisations
and
individuals
who
directly
or
Other
stakeholders
Personnel
Competitors
R&D
indirectly
affect
the
activities
of
a
company:
Intermediaries
§ Suppliers
and
intermediaries
Social/cultural Technological
forces
forces
• Channels
of
Distribution
§ Competitors
§ Government
§ Financial
Institutions
§ Local
community
or
pressure
groups
§ Shareholders
§ Employees
or
Unions
§ Customers
• Macro-‐Environment
o Comprises
more
general
forces
and
trends
rather
than
specific
organisations
§ Macro-‐economic
environment
• Economic
cycles
cause
trends
in
the
consumption
of
goods
and
services,
which
increase
during
‘booms’
and
decrease
in
times
of
‘recession’
as
well
as
price
fluctuations.
§ Political
Environment
• The
stability
of
the
political
system
affects
the
attractiveness
of
the
business
environment.
• Governments
pass
legislation
that
directly
and
indirectly
affects
firms’
business
opportunities.
• Also
trading
blocs
(e.g.
EU,
ASEAN
and
NAFTA)
and
influence
of
worldwide
intergovernmental
organisations
(World
Trade
Organisation)
and
pressure
groups
(e.g.
Greenpeace).
§ Social
&
Cultural
Environment
• A
number
of
general
social
trends
with
potential
impacts
on
businesses
can
be
observed
in
most
developed
economies:
§ Demographic
Environment
§ Ecological
Environment
3
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
01
-‐
The
Firm
1. A
System
Environment
Boundary
A
company
can
be
modelled
as
a
system,
which
Inputs Transformation Outputs
converts
inputs
into
outputs,
and
is
affected
by
the
external
environment.
There
are
a
number
of
factors
of
production
• Natural
Resources
-‐
All
the
natural
resources
used
to
produce
goods
and
services,
including
raw
materials.
• Labour
-‐
The
time
and
resources
people
devote
to
producing
services
or
goods,
and
this
is
rewarded
with
wages.
• Capital
-‐
Is
used
to
buy
all
the
equipment,
buildings,
tools
and
other
manufactured
goods
or
services.
The
return
to
capital
or
the
payment
for
the
use
of
capital
is
interest
(generated
by
banks).
• Information
-‐
Information
is
rewarded
with
knowledge,
which
can
create
an
advantage
for
the
firm.
• Entrepreneurship
-‐
A
special
type
of
human
resource,
that
organises
the
other
3
factors
of
production,
makes
business
decisions,
innovates
and
bares
business
risks,
this
is
rewarded
with
profit.
This
is
the
same
as
the
theory
of
the
4
M’s
of
Operations
Management;
• MEN
• MATERIALS
• MONEY
• MACHINES
Companies
can
also
have
different
types
of
transformations;
• PHYSICAL
-‐
Manufacturing
• LOCATION
-‐
Transportation
• EXCHANGE
-‐
Retailing
• STORAGE
-‐
Warehousing
• PHYSIOLOGICAL
-‐
Health
Care
• INFORMATIONAL
-‐
Telecommunications
The
outputs
of
a
transformation
include
core
services
(delivers
what
the
customer
wants
correctly,
on
time
and
competitively
priced)
and
value-‐added
services
(builds
relationship
with
the
customer
and
is
more
difficult
for
competitors
to
copy):
1
,Sam
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
CORE
• Core
Products/Services
VALUE
ADDED
• Information
• Problem
Solving
• Sales
Support
• Field
Support
In
developed
countries,
firms
are
more
likely
to
be
competitive
if
they
provide
a
higher
proportion
of
value
added
services,
in
addition
to
the
core
product/service.
Inputs Transformation Outputs
Physical Core Services
Natural Resources Location Products or Services
Labour Exchange
Capital Storage Value-Added Services
Information Physiological Information
Entrepreneurship Informational Problem Solving
Sales Support
or Field Support
The 4 M s
2. The
Business
Environment
The
general
global
trend
for
businesses
is:
Developing
World
=
Goods
or
Products
Developed
World
=
Services
There
are
three
main
types
of
business:
• Sole
Trader
• Partnership
• Limited
Company
(Ltd
Co)
/
Public
Limited
Company
(PLC)
2
, Sam
Adams
ES187
-‐
Introduction
to
Engineering
Business
Management
There
are
three
levels
of
the
business
environment:
• Internal
Environment
o The
structure
and
politics
of
an
organisation
affect
the
manner
in
which
the
organisation
responds
to
environmental
change.
§ Marketing
§ Production
The macro-environment
§ Finance
Political/legal The micro-environment Economic
§ Personnel
forces forces
§ Research
&
Development
Suppliers
The internal
Customers
environment
• Micro-‐Environment
Marketing
Production
Finance
o Organisations
and
individuals
who
directly
or
Other
stakeholders
Personnel
Competitors
R&D
indirectly
affect
the
activities
of
a
company:
Intermediaries
§ Suppliers
and
intermediaries
Social/cultural Technological
forces
forces
• Channels
of
Distribution
§ Competitors
§ Government
§ Financial
Institutions
§ Local
community
or
pressure
groups
§ Shareholders
§ Employees
or
Unions
§ Customers
• Macro-‐Environment
o Comprises
more
general
forces
and
trends
rather
than
specific
organisations
§ Macro-‐economic
environment
• Economic
cycles
cause
trends
in
the
consumption
of
goods
and
services,
which
increase
during
‘booms’
and
decrease
in
times
of
‘recession’
as
well
as
price
fluctuations.
§ Political
Environment
• The
stability
of
the
political
system
affects
the
attractiveness
of
the
business
environment.
• Governments
pass
legislation
that
directly
and
indirectly
affects
firms’
business
opportunities.
• Also
trading
blocs
(e.g.
EU,
ASEAN
and
NAFTA)
and
influence
of
worldwide
intergovernmental
organisations
(World
Trade
Organisation)
and
pressure
groups
(e.g.
Greenpeace).
§ Social
&
Cultural
Environment
• A
number
of
general
social
trends
with
potential
impacts
on
businesses
can
be
observed
in
most
developed
economies:
§ Demographic
Environment
§ Ecological
Environment
3
