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Business Key Terms

Unit 100: Aims and Vision A business aims and visions can be: maximize profits (when difference between revenues and costs is greater); maximize shareholder value (value of company to its owners); maximize sales revenue (income); maximize growth (ex. Capital value, number of employees, etc.); maximize employee benefits; benefit the local community and the environment; survive. *Main aim for small businesses: maximize profit (so that they can survive). *Main aim for big companies: maximize shareholder value. *Vision statement: Statement that shows what the company wants to be in present-day and the future. It is aspirational and inspirational. *Behavioral theories of the firm: business must have multiple aims set by main stakeholders. *Managerial theories of the firm: business is controlled by manager to his/her own benefit to make enough profit to satisfy shareholders. Unit 101: Objectives and mission Objectives must be reasonable and time specific. SMART: specific, measurable, agreed,

*Corporate objectives: Set by senior management and directors; affect the company as a whole. *Functional objectives: Set by departments in a company. *Mission statement: Brief, written by a business; describes a companys purpose and objectives and makes it focus on present operations. Unit 102: Strategy - Business: involves how a business gains competitive advantage in the market. - Global: businesses are linked to them for larger companies. Types of business strategies to achieve aims: *Corporate strategy: deals with how to achieve main objectives of the whole business by focusing on two issues. The first is the size of the business (enough resources to achieve objectives set or not) and the range of activities needed to be

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undertaken so that the business achieves it goals. Can grow vertically (sells to/buys from), horizontally (expand), conglomerate (unrelated markets), organically (from within), and taking over or merging with other businesses. Key issue of growth: synergy. *Business unit strategies: made by division or subsidiary company owned by a parent company. *Functional strategy: made by department within a business. Strategic direction and gaps *Direction: path which a business plans to follow to achieve goals. *Gaps: difference between where a business predicts it will be in medium/long term and where it wants to be. Unit 103: Planning Corporate plans: Large businesses are likely to achieve goals if they develop them. Their purposes are to help a business define objectives, identify path to achieve them, and identify risks and probabilities. Process: clarify objectives -> internal and external audits (analyses of the business itself and the environment in which it operates) -> SWOT analysis (strengths, weaknesses, opportunities, threats) -> develop plans to achieve objectives -> implement plans -> review & evaluate outcomes -> prepare next plans. Objectives: Strategic: Main objectives of a business to achieve aims. *Planning horizon: time in which plans are made to achieve strategic objectives. Tactical: Short-term objectives which help businesses to achieve strategic objectives. Operational: achieved on a day-to-day basis.

PESTLE: Analysis of the political, economic, social, technological, legal, and environmental issues relevant to the business. Why do corporate plans fail: unrealistic objectives, conflicting objectives, poor planning, poor execution of the plan, corporate culture, and uncontrollable variables.

Ana Paulina Cant A01191866 Unit 104: Decision making Types of decisions:

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*Programmed decisions: repetitive, have a routine, have a procedure, formal rules, usually carried out on a computer. *Non-programmed decisions: unstructured, not suitable for procedures, have a long-lasting effect on business. *Strategic decisions: made by owners, shareholders and sometimes board of directors; have a high risk, long-term decisions, concern general direction and overall policy of a business, influence performance of organization. *Tactical decisions: made by senior/junior managers; medium-term decisions, have a more predictable outcome, may be used to implement strategic decisions. *Operational decisions: made by employees; lower level decisions (administrative decisions), taken quickly, short-term and carry little risk. Decision making process: identify objectives -> collect info and ideas -> analyze info and ideas -> make decisions -> communication -> outcome -> evaluate results. Decision making models: provide aid to problem solving, simplified versions of concerns, stimulate actions & processes, formulae are used to express concepts, show key characteristics of concerns. Constraints: internal (ex. peoples behavior) and external (ex. government). *Decision quality depends on: training, quantity & quality of info, ability to use decision making techniques, risk, and human element. *Business interdependence: price, launching new products, packaging, non-price competition, new technology, exploiting new markets. Unit 105: Decision trees Decision trees: technique which shows all possible outcomes of a decision. *Quantitative approach is used sin info is represented as numbers. * Course of a decision tree: Decision points (where decisions are made, represented by squares) -> outcomes (chance nodes, where different possible outcomes are represented as circles) -> probability or chance.

Ana Paulina Cant A01191866 Expected value formula: Success + Failure Probability (profit) + Probability (loss)

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Advantages: The tree diagram may show possible courses actions not previously considered. Give numerical values to decisions (which improves results) Identify risks.

Disadvantages: Information is not exact (probabilities) Qualitative data also has to be considered. Process can be long Data can be manipulated Decision trees can become obsolete

Unit 106: Fishbone analysis and force field analysis Fishbone diagrams: 1. - problem is identified, 2. - causes of problem are identified, 3. major causes/general causes are showed with their redefined causes (causes of a major cause). Force field analysis -Driving forces: forces that promote change -Restraining forces: forces which prevent change Unit 108: Organizational culture Organizational value refers to the values, attitudes, beliefs, meanings and norms that are shared by people and groups within an organization. Three values: -Surface manifestations: Examples of organizational culture that can easily be seen by a wide range of stakeholders. (furniture, courses, heroes of the business, mottoes, language used in the business, slogans, etc.)

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-Organizational values: Consciously thought out and expressed in words and policies. Ex. Values in a mission statement. -Basic assumptions: Represent the totality of individuals beliefs and how they behave. Types of organizational culture: *Power culture: Central source of power which is responsible for decision making. Theres a competitive atmosphere; people compete to gain power to achieve their own objectives. (This happens in small businesses where theres a single owner). *Role culture: There are established rules and procedures; power is associated with a role. The power an individual has of company depends on his/her role in it. *Task culture: Power is given to those who can accomplish tasks. Teamwork is common here (scientists are an example). *People culture: A group of people with expertise in a business that doesnt necessarily work together. Purpose of these organizations: support these people. Examples: lawyers, firms of accountants, doctors, or architects. Changing the organizational culture involves the workers and managers views, technology and the physical environment, and the external environment. *Organizational culture can change motivation, organizational management, and even provoke mergers and takeovers. structures,

*Advantages of corporate culture: provides a sense of identity to employees, increases commitment that employees have to the company, motivates workers in their jobs, allows employees to understand what is going on around them, helps reinforce values, it is a control device for management. *Criticism to corporate culture: Differences of opinion and interests between groups: employees share some viewpoints, disagree on others, and are indifferent to others.

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Culture gap: difference between current culture and culture desired by certain stakeholders (ex. senior manager) Unit 109: Implementing and managing change *Changes in a business are caused by: developments in technology, market changes, consumer tastes, legislation, changes in the workforce, and changes in the economy. Effects of change: Product life cycles could become shorter, role of market research is likely to increase, quality becomes more important due to consumer awareness develops and competition increases, etc. Resistance to change: Workers sometimes fear the unknown, individuals may fear working with other people and not their friends, or maybe become unemployed. Owners, customers and suppliers may also have resistance to change. Removing resistance to change: Clear objectives for everyone involved in the change, use a project champion, prevent misinformation and rumors about the change, enough resources to achieve change, etc. Approaches to manage change: - Total imposed package: change is imposed completely. - Imposed piecemeal initiative: change is imposed little by little. - Negotiated piecemeal initiative: change is negotiated little by little. - Negotiated piecemeal initiative: change is negotiated, employees have a vote. *Performance indicators: Can be used to evaluate the management of change. Unit 110: Economic growth and the business cycle *GDP: (Gross Domestic Product) Method used to calculate national income. Cycle: *Boom -> the economy is doing well (consumer spending is high, unemployment is low, output is high, etc.). *Downturn -> the GDP is falling. *Recession: the economy is going through a period of low growth.

Ana Paulina Cant A01191866 *Recovery: the economy begins to grow again. Unit 125: Business ethics *Ethics: Morality, its about doing whats right.

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*Ethical code of practice: statement about how employees in a business should behave in circumstances where ethical issues arise. All ethical codes of practice differ from one company to another but they all usually state something about competing fairly, being environmentally responsible, being honest to customers and suppliers. *Ethical codes may develop from ethical objectives of a company. There are implicit/explicit ethical objectives in a company. *Benefits of ethical behavior: consumers see companies in a better way, marketing purposes. *Costs: loss of profit, conflicts. Should business be expected to act ethically? Yes: because of responsibility of firms and of the effects of a business decisions in many aspects of society. No: because of importance of making more profit and because of the free market economy. Unit 127: Corporate responsibility *Corporate responsibility: responsibility that a business has all stakeholders and not just to owners or shareholders. Ex. Employment, human rights, communities in which business operates, business integrity and ethics, product responsibility, and environment.

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