ch01 Gabungan

Organization of a Business
Copyright 2004 South-Western. All rights reserved.
11
Key Business Decisions

Product
What type of product should be produced?

Production
How should the product be produced?

Promotion
How should the product be promoted?

Financing
How should the company obtain funds to

finance the cost of producing the product?
12
Business Decisions
13
Key Stakeholders
Owners
Entrepreneurs
Co-owners
Stockholders
Creditors
Employees
Managers
Suppliers
Customers
14
Interaction among Owners,

Employees, Customers, Suppliers,
and Creditors
Exhibit 1.1
15
Creating a Business Idea

Identify
a competitive advantage.
Differentiate the product or service
from competitors.
Determine necessary resources.
Assess feasibility of the idea.
16
Success Stories
Dominos Pizza
Managhans bought bankrupt pizza parlor
Started with little funding
Now generates sales of $1 billion per year
Jeremys Micro Batch Ice Cream
Applied microbrewery concept to ice cream
Makes ice cream in small batches, sold in limited
editions
Glow Dog, Inc.
Sells light-reflective clothing for pets
After two years, average annual sales of $1 million
17
Lessons to Remember
Successful
businesses do not require

a great invention.
Many focus on making life more convenient
for customers.
Some
business ideas will failbut

entrepreneurs can learn from
failures and make revisions.
18
Key Functions of Business
Management
Means by which employees and other resources
are used by the firm
Marketing
Means by which products and services are
developed, priced, distributed, and promoted to
customers
Finance
Means by which firms obtain and use funds for their
business operations
19
Key Functions of Business

Accounting
Summary and analysis of the firms financial

condition
Used to make various business decisions
Information
systems
Information technology, people, and

procedures that provide appropriate
information to make effective decisions
110
How Business Decisions

Affect a Firms Earnings
Exhibit 1.4
111
Common Business
Decisions
Management
Decisions
What equipment is needed?

How many employees should be hired?
How can employees be motivated to perform
well?
112
Common Business
Decisions
Marketing
Decisions
What price should be charged?

Should the product be changed to be more
appealing to customers?
Should the firm use advertising or some
other strategy to promote its product?
113
Common Business
Decisions
Finance
Decisions
Should financial support come from the sale

of stock or from borrowing money or some
combination?
Should the firm attempt to obtain borrowed
funds for a short-term or long-term period?
Should the firm invest funds in a new
business project?
114
A Business Plan
Detailed
description of the proposed
business
Description of the product or service
Types of customers the business would
attract
Competition
Facilities needed for production
115
Developing a Business
Plan
Assess
the Business Environment
Economic environment
Industry environment
Global environment
Develop
Management Plan
Organizational Structure
Production
Human Resources
116
Developing a Business
Plan
Marketing Plan
Target Market
Product Characteristics
Pricing
Distribution
Promotion
Financial Plan
Financing
Feasibility
117
TRANSPARENCY-88
Exhibit
10.4
Matrix Structures:
Advantages and
Disadvantages
Chief Executive
Officer or President
Corporate
Staff
Manager
Administration
and Human
Resources
Manager
Projects
Manager
Manufacturing
Manager
Engineering
Manager
Marketing
Manager Public
Relations
Project A
Project B
Project C
Project D
118
TRANSPARENCY-74
Exhibit 8.5
How the Internet Influences

Industry Structure
(+) By making an overall industry more efficient, the Internet can expand sales in that industry.
(-) Internet-based capabilities create new substitution threats.
Threat of substitutes
(-) Technology-based efficiencies can be captured, lowering the impact of scale economies.
(-) Differences among competitors are difficult to detect and to keep proprietary.
Bargaining power
of suppliers
Bargaining power
of channels
Rivalry among
existing competitors
Buyers
Bargaining
power of end
users
(-) More price-based competition intensifies rivalry.

(+/-) Procurement using the Internet may raise
bargaining power over suppliers, but it can also
give suppliers access to more customers.
(-) The Internet provides a channel for suppliers to
reach end users, reducing the power of
intermediaries.
(-) Widens the geographic market, increasing the

number of competitors.
(+) Eliminates powerful

channels or improves
bargaining power over
traditional channels.
(-) Shifts bargaining power to

consumers.
(-) Reduces switching costs.
Threat of new entrants
(-) Internet procurement and digital markets tend

to reduce differentiating features.
(-) Reduced barriers to entry and the proliferation (-) Reduces barriers to entry such as need for a sales force, access
to channels, and physical assets.
of competitors downstream shifts power to
suppliers.
(-) Internet applications are difficult to keep proprietary from
new entrants.
(-) A flood of new entrants has come into many industries.
Source: Adapted from: Porter,

M.E. 2001. Strategy and the
Internet. Harvard Business
Review, March: 63-78.
119
TRANSPARENCY-67
Extent of Investment and Risk
Exhibit 7.7
Entry Modes for

International Expansion
High
Wholly
WhollyOwned
Owned
Subsidiary
Subsidiary
Joint
JointVenture
Venture
Strategic
StrategicAlliance
Alliance
Franchising
Franchising
Licensing
Licensing
Low
Exporting
Exporting
Low
High
Degree of Ownership and Control
120
TRANSPARENCY-42
Exhibit 5.1
Three Generic Strategies
STRATEGIC TARGET
COMPETITIVE ADVANTAGE
Industrywide
Uniqueness Perceived
By the Customer
Low Cost Position
Differentiation
Overall
Cost Leadership
Particular
Segment Only
Source: Adapted
from Porter,
M.E. 1980. Competitive
Strategy,
New York: Free Press, page 39.
Copyright
2004
South-Western.
All rights
reserved.
Focus
121
TRANSPARENCY-35
Exhibit 4.2
Interdependent
Activities
Attracting
Developing
Human
Human
Capital
Capital
Retaining
Human
Capital
122
TRANSPARENCY-24
Exhibit 3.4
The Resource Based View of the Firm:

Resources and Capabilities
Tangible Resources
Financial
Firms cash account and cash

equivalents
Firms capacity to raise equity
Firms borrowing capacity
Physical
Technologi
cal
Intangible
Resources
Effective strategic planning processes
Organizatio
Firm competences or skills the firm

employs to transfer inputs to outputs
Capacity to combine tangible and

intangible resources, using organizational
processes to attain desired end
Trade secrets
Innovative production processes
Patents, copyrights, trademarks
nal
Human
Modern plant and facilities

Favorable manufacturing locations
State-of-the-art machinery and
equipment
Source: Adapted
from J.B. Barney,
1991, Firm
resources and
sustained
competitive
advantage, Journal
of Management,
17: 101; R.M.
Grant, 1991,
Contemporary
Strategy Analysis
(Cambridge, U.K.:
Blackwell
Business), 100102. Hitt, M.A.,
Ireland, R.D. &
Hoskisson, R.E.
2001. Strategic
Management:
Competitivenesss
and Globalization.
Fourth Edition.
South-Western
College Publishing:
Cincinnati, Ohio.
Organization Capabilities
Examples:
Outstanding customer service
Excellent product development
capabilities
Innovativeness of products and services
Ability to hire, motivate, and retain
human capital
Experience
and capabilities
of employees
Excellent
evaluation
and control
systems
Trust
Managerial skills
Firm-specific practices and procedures
Innovation
and
creativity
Reputation
Technical and scientific skills

Innovation capacities
Brand name
Reputation with customers for quality and reliability
Copyright 2004 South-Western. All rights
reserved.
Reputation
with suppliers for fairness, non-zero sum relationships
123
TRANSPARENCY-21
Exhibit 3.1
The Value Chain: Primary and Support

Activities
Support Activities
The Value Chain
ar
M
General administration
Human resource management
gi
Technology development
Operations
Outbound
logistics
Marketing
and sales
Service
M
ar
g
Inbound
logistics
in
Procurement
Primary Activities
Source: Adapted with the permission of The Free Press, a division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining
Superior Performance by Michael E. Porter. Copyright 1998 by Michael E. Porter.
124
Marketing Decisions and Firm

Value
Product strategies
Target appropriate market

Differentiate products from competitors
Pricing strategies
Proper pricing can increase future cash flow
Distribution strategies
Influence the number of customers reached by firms
products
Promotion strategies
Increase acceptance of products through special
deals, advertising, and publicity
125
Management Decisions and

Firm Value
Motivating employees
Increase employee satisfaction

Align compensation with performance
Provide job security
Provide flexible work schedule
Utilize employee involvement programs
Managing employees
Proper recruiting and screening of new hires
Develop employees skills
Establish proper performance evaluation procedures
126
Management Decisions and

Firm Value
Strategic planning
Capitalize on opportunities that increase revenue or
reduce production costs
Organizational structure
Try to attain low level of operating expenses
Production process
Plant site location to minimize costs
Design and layout to reduce costs
Quality to improve customer satisfaction and firms
reputation
Use technology to improve efficiency
127
Valuation of a Business
Firms
value is equal to the present

value of its future cash flows
Cash inflows come from sales
Cash outflows result from payment of
expenses or taxes
Firms value is highly influenced by its
expected future earnings
128
Exposure to Firm-Specific
Characteristics
129
Exhibit 19.4
Summary of Capital Budgeting

Tasks
130
Exhibit 17.2
Summary of Firms Debt and

Equity Financing Methods
131
Exhibit 16.4
Chapter Summary
Firms financial condition is important to

financial managers, creditors and
stockholders.
Income statement and balance sheet are

the most important financial statements
used to evaluate a firms financial
condition.
Financial ratios help evaluate a firms

liquidity, efficiency, profitability, and
financial leverage.
132
Example of Income
Statement: Taylor, Inc.
133
Exhibit 15.1
Income Statement
Net
sales
Cost of goods sold
Gross profit
Operating expenses
Earnings before interest and taxes
Earnings before taxes
Net income (earnings after taxes)
134
Amount of Promotion Used

throughout
the Products Life Cycle
135
Exhibit 14.9
Summary of Methods That Make

Up the Promotion Mix
136
Exhibit 14.7
Chapter Summary
Demographic trends, geography, economic

factors, and changes in social value impact
size of target market
Creation of new products involves a number of

steps from developing the idea to a post-audit
Companies use unique product design,

packaging, and branding to differentiate
Cost of production, inventory supply, and

competitors prices influence pricing decisions
137
Product Life Cycle

Typical
phases over the lifetime of

products
Introduction - create awareness of product
Growth - reinforce product features
Maturity - competition increases
Decline - reduced demand
Marketing
decisions may be
influenced by the stage in the
product life cycle
138
Methods Used to
Differentiate Products
Method
Achieve Superiority by:
Unique design
Higher level of product safety,
reliability, or ease of use.
Unique packaging Packaging to get consumers
attention or to improve
convenience.
Unique branding
Using the firms image to gain
credibility, or using a unique brand
name to imply
prestige.
139
Exhibit 12.4
Methods Used to Enhance Job

Satisfaction
140
Exhibit 10.9
Methods Used to Enhance Job

Satisfaction
141
Exhibit 10.9
Hawthorne Studies
In
1920s, researchers studied

workers in a Western Electric plant:
Attempted to identify how working conditions
affected workers level of productivity.
Increases
in lighting and decreases in

lighting both improved productivity
Shorter breaks and longer breaks both
increased productivity
Concluded that any changes in conditions that

reflect increased attention toward employees
increased productivity.
142
Theories on Motivation
Motivation
of employees is
influenced by job satisfactionthe
degree to which employees are
satisfied with their jobs
Employees who are satisfied with their jobs
are more motivated.
Managers can motivate employees by
ensuring job satisfaction.
143
Structure and Employee

Input
Intrapreneurship
Structure can be adjusted to obtain greater

employee input
Encouraging employees to offer ideas for

changes that enhance the firms value.
Assigning employees to act as if they were
entrepreneurs running their own companies.
Informal
Structure
Allows employees to substitute for each other to

complete tasks on time.
Reduces amount of manager involvement.
144
Line and Staff

Organization
145
Exhibit 8.5b
Line Organization
146
Exhibit 8.5a
Managerial Skills
Conceptual skills
Understanding the
relationships among
various tasks of the
firm
Interpersonal skills
Skills necessary to
communicate with
customers and
employees
Technical skills
Skills used to perform
specific day-to-day
tasks
Decision-making
skills
Skills for using
existing information to
determine how the
firms resources
should be allocated
147
Controlling
Evaluating
tasks by measuring
performance and comparing it to
standards and expectations
Determine if plans have been achieved
Allows for continual evaluation of plans

Some standards are firm-wide, other standards are
department specific
Detects deficiencies and take corrective

action which may require a change in the
standards.
148
Leading (contd)
The
process of influencing the habits

of others to achieve a common goal
by:
Motivating employees
Delegating responsibility
Encouraging employee feedback
Leading must be consistent with strategic

plan.
Demonstrating initiative by a willingness to
take action.
149
Leading
Process
of influencing the habits of

others to achieve a common goal
by:
Communicating job assignments and
methods of completing tasks to employees.
Serving as a role model for employees.
Providing incentives to complete jobs
correctly.
150
Organizing
Proceeds
once the firms goals are

established (planning)
Resources are obtained and organized to
achieve those goals.
The organizing function occurs continuously
throughout life of firm.
Organizing expertise is especially important
when firms restructure frequently.
Creation of new jobs and positions may
require revision of job assignments.
151
Planning
Strategic plan
Identifies long-term
business focus,
mission statement is a
key component
Establishes methods
for use in the near
future to achieve
tactical plans
Follow organizations
policies and procedures
Tactical plans
Smaller-scale plans
(1-2 years) that are
consistent with the
long-term plan
Operational plans
Contingency plans
Alternative plans
developed for possible
business conditions
152
How Various Business Functions

Are Used to Achieve the
Strategic Plan
153
Managing Effectively
154
Develop Competitive
Advantage
Ways
to maintain or increase market

share:
Low-cost production
Set a lower price to gain market share.
Better quality than competitors
Create higher quality without incurring excessive

costs.
Product differentiation
Satisfy customer needs in ways that are different

than competitors.
155
Chapter Summary
Firm
performance depends on three

macroeconomic factors: economic
growth, inflation, and interest rates.
Demand
and supply conditions

determine market prices.
Federal
government uses monetary

and fiscal policies to influence
macroeconomic conditions.
156
Possible Expenses Incurred

as a Result of Social
Responsibilities
157
Exhibit 3.10
Summary
Business
ethics influence decisions

Firms have basic responsibilities
Provide safe working conditions
Treat work workers properly
Provide equal opportunity for employees
Make decisions in best interest of
stockholders
Maintain a clean environment
158
Summary
Entrepreneurs can select a form of ownership:

Sole proprietorship
Partnership
Corporation
Return and risk depend on form of business
ownership.
Common methods for obtaining ownership of
existing businesses:
Family business
Purchase existing business
Franchising
159
Types of Franchises
Distributorship
Dealer is allowed to sell a product produced

by a manufacturer.
Chain-Style
Business
Firm is allowed to use the trade name of a

company and follows guidelines related to the
pricing and sale of the product.
Manufacturing
Arrangement
Firm is allowed to manufacture a product

using the formula provided by the franchisor.
160
Franchising
Business
owner (franchisor) allows

another (the franchisee) to use its
trademark, trade name, or
copyright, under specified
conditions.
Each franchise operates as an
independent business.
Typically owned by a sole proprietor.
161
Impact of Forms of
Ownership
162

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Organization of a Business

Copyright 2004 South-Western. All rights reserved.

Key Business Decisions

What type of product should be produced?

How should the product be produced?

How should the product be promoted?

How should the company obtain funds to

Copyright 2004 South-Western. All rights reserved.

Interaction among Owners,

Copyright 2004 South-Western. All rights reserved.

Creating a Business Idea

Copyright 2004 South-Western. All rights reserved.

Copyright 2004 South-Western. All rights reserved.

businesses do not require

business ideas will failbut

Copyright 2004 South-Western. All rights reserved.

Key Functions of Business

Copyright 2004 South-Western. All rights reserved.

Key Functions of Business

Summary and analysis of the firms financial

Information technology, people, and

Copyright 2004 South-Western. All rights reserved.

How Business Decisions

Copyright 2004 South-Western. All rights reserved.

What equipment is needed?

Copyright 2004 South-Western. All rights reserved.

What price should be charged?

Copyright 2004 South-Western. All rights reserved.

Should financial support come from the sale

description of the proposed

Copyright 2004 South-Western. All rights reserved.

the Business Environment

Copyright 2004 South-Western. All rights reserved.

Copyright 2004 South-Western. All rights reserved.

How the Internet Influences

(-) More price-based competition intensifies rivalry.

(-) Widens the geographic market, increasing the

(+) Eliminates powerful

(-) Shifts bargaining power to

Threat of new entrants

(-) Internet procurement and digital markets tend

Source: Adapted from: Porter,

Extent of Investment and Risk

Entry Modes for

Degree of Ownership and Control

Copyright 2004 South-Western. All rights reserved.

Three Generic Strategies

Low Cost Position

The Resource Based View of the Firm:

Firms cash account and cash

Firm competences or skills the firm

Capacity to combine tangible and

Modern plant and facilities

Technical and scientific skills

The Value Chain: Primary and Support

The Value Chain

Copyright 2004 South-Western. All rights reserved.

Marketing Decisions and Firm

Target appropriate market

Copyright 2004 South-Western. All rights reserved.

Management Decisions and

Increase employee satisfaction

Copyright 2004 South-Western. All rights reserved.