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Introduction

Introduction. Foundations in Business. A simpler time…. Meet Bob. Bob goes fishing every morning. Work: He creates something of value for his family through fish. (He catches them and he owns them) Benefit: He and his family eat fish and live. Costs: - They are sick of fish.

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Introduction

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Presentation Transcript

  1. Introduction Foundations in Business

  2. A simpler time….. Meet Bob

  3. Bob goes fishing every morning • Work: He creates something of value for his family through fish. (He catches them and he owns them) • Benefit: He and his family eat fish and live. • Costs: - They are sick of fish. - The fish stink after a day or two.

  4. Too many fish…... • Bob’s wife and children become cranky. • Risa is a corn grower - she has too much corn - and wants some fish. • Transaction: An exchange fish for corn both Risa and Bob are better off (profit).

  5. Bob keeps fishing... • Bob wants a fishing pole made by George. • George doesn’t want fish - he wants corn. • Risa still has fish and doesn’t want more -she wants cookies. • Fred has cookies and he wants fish: Fish – cookies – corn – pole • Value - function of scarcity and need

  6. Evil Ralph - The net fisher • Ralph loves to fish and he’s good at it. • His net catches 10 times more fish in less time. • Bob curses the new technology.(technological innovation) • Ralph gives everyone 2 times the number of fish Bob does. (What happens to value of Bob’s fish?) • Bob decides to get up earlier and fish with three poles. (process innovation)

  7. An earlier start & 3 poles ... • Bob doubles his catch - Before: 10 fish in 5 hours = 2 fish / hour Now: 20 fish in 5 hours = 4 fish / hour (Increased productivity) • Evil Ralph the net fisher - 100 fish in 4 hours = 25 fish / hour • Bob can’t compete – Bob has to respond … but how?

  8. What should Bob do? • Bob could kill Ralph, but that would be really wrong. • Bob could cut Ralph’s nets, but that would also be unfair. But -- while Bob is thinking - He carves a bird for his wife.

  9. Birds…. • Risa wants Bob to do something about the stinking fish. • Risa sees Bob’s bird carving and wants to trade. • Her friends see Risa’s bird and they want to trade also.

  10. Stop fishing - start birds • Competition - invisible hand of the market • Efficient allocation of resources • An inefficient fisher becomes an efficient bird carver • Community - • more products (2x as many fish) • new products (additional wealth)

  11. Business and Creating Wealth In a private enterprise system: • Individuals (acting in their own self-interest) will compete to participate in transactions in a market. • The terms of the transaction (price and quantity) will be determined by the supply of and demand for that good or service. • This system will produce an efficient allocation of resources (greater productivity), the lowest price, and pressure for innovation (technological and procedural).

  12. Creating Wealth-transactions • Exchanges occur only when you are made better off (wealth) • Competition to be a part of exchanges results in: • Pressure for lower prices • Pressure for newer / better products • Pressure for more efficient ways to do things

  13. To manage the economic part of your life... • You have to understand : - How the system works (basic principles) - The current complexity • To be an informed as: - An owner - An employee - A consumer - A citizen Stakeholders

  14. Chapter 1: BUSINESS NOW Change is the Only Constant

  15. In the last decade: The players have changed What consumers want has changed How we buy has changed MOVING AT BREAKNECK SPEED Source:http://money.cnn.com

  16. BUSINESS BASICS A business is any activity that provides goods and services in an effort to earn profit. • Non-profit organizations focus on causes not profit

  17. BUSINESS BASICS Profit is the financial reward that comes from starting and running a business. • the money that a business earns in sales (or revenue), minus expenses

  18. NONPROFIT PARTNERSHIPS The Business of Doing Good Many nonprofits work with businesses to improve the quality of life in society. Companies support their missions and improve society.

  19. ENTREPRENEURIAL SPIRIT

  20. CREATIVITY MATTERS • Creativity is important to the economy • with global competition, the stakes are high • Many of the latest inventions have come from companies • this trend is likely build momentum as global competition intensifies

  21. INVENTIONS WITH IMPACT Disposable Diapers Cat Litter Bikinis Muzak Laptop Viagra Camcorder Kool-Aid Astroturf Source: Encyclopedia Britannica

  22. THE EVOLUTION OF BUSINESS Long-term Relationships Satisfied Customers Use of Technology Consumer Power Growth in Consumerism Product Differentiation Customer Focus Assembly Line Refining Production Productivity Gains Decrease Costs Hard Sell No Customer Focus Industrial Titans Wealth Creation Increase in Living Standard Manipulation/Competition Exploitation Mass Production Factories Work Specialization Efficiency

  23. FACTORS OF PRODUCTION • Businesses rely on some combination of these factors • Entrepreneurship is a key factor • Most growing economies support and promote entrepreneurship Natural Resources Human Resources Capital Entrepreneurship

  24. THE ELEMENTS OF THE BUSINESS ENVIRONMENT

  25. DYNAMIC, CONSTANT AND ENGAGING, CHANGE “ • Companies must respond quickly and creatively • New Products • Integrating Technology • Creating Technologies • New Businesses • Innovative Processes • New Target Markets….. When the change on the outside exceeds the change on the inside, the end is near.” - Jack Welch “

  26. ECONOMIC ENVIRONMENT • Government takes an active role to support businesses • Low Federal Tax Structure • Small Business Administration • Federal Trade Commission • Legislation & Enforceable Contracts Free Enterprise and Fair Competition Flourish in the United States • Economic Vulnerabilities • CEO/Worker Pay Gap • Consumer Debt • Federal Debt

  27. COMPETITIVE ENVIRONMENT • Today’s competition is intense • Companies must focus on customer satisfaction • Build Long-Term Relationships • Provide Value • Customer Satisfaction = Profitability • Cheap Doesn’t Equal Value

  28. COMPETITIVE PRINCLIPLES • Avoid your competitors’ strengths and exploit their weaknesses. Don’t try and beat them at their game. • Always be a little paranoid. Never underestimate your competition. • Competitors will usually get better when pushed. • Competitors are sometimes irrational when pushed.

  29. COMPETITION IS CHANGING

  30. SOCIETY CHANGES • What are our changing values and beliefs? • How does the integration of other cultures change/add to values and beliefs? • What demographic influences are changing the environment globally? Companies must respond to these changes in the products they sell and how they sell them.

  31. AND CHANGES…… Teens today are much less likely than their parents to categorize people by race, religion, and sexual orientation. They’re more likely to notice similarities and differences in core values. Source: Diversity in Word and Deed: Most Teens Claim Multicultural Friends, press release from Teenage Research Unlimited, November 10, 2004, TRU Website, http://www.teenresearch.com/PRview.cfm?edit_id=278.

  32. SOCIAL ENVIRONMENT • Diversity • Aging Population • Rising Worker Expectations • Ethics & Social Responsibility

  33. GENERATION C • Creating Content • Customizing Products • Websites • Blogs • Photos • Ringtones • Music • Movies

  34. TECHNOLOGICAL ENVIRONMENT • Technology has transformed businesses and consumers • How Companies Do Business • Telecommunications • Robotics • Flexible Manufacturing • Alternative Selling/eCommerce • How Consumers Shop • Online Information/Content • Alternative Buying/eCommerce

  35. TECHNOLOGICAL ENVIRONMENT More than 724,000 Americans report that eBay is their primary or secondary source of income, And an additional 1.5 million people say that they supplement their incomes by selling on eBay. Source: US Postal Service News Release, July 21, 2005. http://www.usps.com/communications/news/press/2005/pr05_062.pdf.

  36. GLOBAL ENVIRONMENT Technology Free Trade Technology is linking customers/suppliers worldwide China and India’s economies are growing Job Migration Terrorism is more of a threat today Blurred lines between countries/world

  37. GLOBAL ENVIRONMENT According to investment bank CLSA, China manufactures 80% of the world’s clocks and watches, 50% of its cameras, 30% of its microwave ovens, a quarter of its washing machines, and a fifth of its refrigerators.

  38. COOLEST BRANDS According to Chinese college students Nike 30.8% Sony 15.9% Adidas 15.1% BMW 10.1% Microsoft 9.0% Coca-Cola 8.9% IBM 8.2%

  39. BUSINESS AND YOUMAKING IT PERSONAL What are your passions? What are business careers that encompass your passions?

  40. Foundation Simulation • $40 Million electronic sensor manufacturer. • Market dominated by handful of firms. • No outside competitors or substitutes. • Benign environment.

  41. Production R&D Marketing Finance Functional Areas

  42. Who are my customers? Segmenting markets: target markets • What are the market segments in Foundation? • Low tech segment • High tech segment • In terms of units sold, what is the largest market segment in Foundation? • How fast is demand growing?

  43. Two Market Segments Large Low Tech Size High Tech Small Fast Slow Performance

  44. Product What do they want? • Product is a bundle of physical, service, and symbolic attributes designed to satisfy customer wants • Electronic sensors characteristics - Size - Performance (processing speed) - Reliability (MTBF) - Age: how recently has it been updated

  45. Low Tech High Tech • Price • Age • Reliability • Positioning • Positioning • Age • Price • Reliability Segment Criteria Ranking Different customers value different product characteristics

  46. Foundation Homework • Register at www.capsim.com • Section 010 - F20047 • Section 020 - F20050-000 • Section 050 - F20048 • Section 060 - F20049 • Teams Completed by September 12th

  47. We need 9 volunteers to Create a Company today • Everyone else can Join a Company (3 members per team)

  48. When teams are finalized Sept. 12, changes can be made

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