1_Introduction to Business Flashcards
What is a Business ?
Restrictive Def:
“Business is the organized effort of individuals to produce and sell the goods and services that satisfy society’s need, for a profit.”
Organized = different type of organization are possible. Possible to have different type of contracts which specify this.
Satisfied need = understand society needs (food/ shelter) or status symbol (purchase watch or bag)
Broader definition :
“Business is an organization or enterprising entity engaged in commercial, industrial or professional activities. Business can be for-profit entities or they can be non-profit organizations that operate to fulfill a charitable misson or further a social cause”
- Commercial = B2C marke (zB Starbucks)*
- Industrial = B2B Interactions*
- Professional activities = zB Lucerner Police Force (security is not for sale)*
What does running a successful business mean ?
Running a successful business means being able to transform various input factors into outputs that customers value and to sell these outputs to customers at a profit
Why do we need Business Administration ?
Managing the transformation processes requires specialized knowledge about different types of the chosen markets, resources and capabilities.
Notes: Inputs tend to be limited but people have unlimited needs. We usualy have to economize the inputs + use them in the best possible way.
Notes: Chosen Market is Business Administration. This choise markes us more successful, How to combine inputs – that is the topic of strategic management.
Takeaway: Business operate by transforming input factors and ressources from different market into outputs that they aim to sell to customers at a profit
What are examples of Input ?
Labour Market (hires employees)
Procurement Market (materials)
Financial Market
Sales Market
What is the “transformation process”?
Firms produce outputs from a combination of inputs
Successful firms clearly define who their target customers are, what they value, and which activities to engage in to deliver customer value at a profit.
E.g. Human Resource Management,
Marketing,
Finance,
Controling,
Accounting,
It,
Logistics
Notes: These have a cost to be done;
What is the output ?
Sales Market (products and services)
Why does Business exists ?
(takeaway on intro du business)
Businesses exist to satisfy society’s needs. That is, all businesses need to have a market-orientation that allows them to sense and understand customer needs and value perceptions.
(takeaway on intro du business)
How can a business make profit ?
Two key words:
- Added Value
- Durability
For a business to be able to earn a profit, it has to create added value for customers.
The customer’s value perception of the output has to exceed the price that the business is charging to (at least) cover the costs of the input factors and of the transformation and selling process.
Takeaway: For a businesses to make a profit, it has to create added- value for customers. Meaning no profit without added value for customers.
Notes: Business activity must produce a new value. That is why people are willing to pay the price.
What is the perceived value ?
- What is the relation of perceived value to the customers ?
The customers will base their purchase decisions on the ‘perceived value for money’
The customer’s value perception of the output has to exceed the price that the business is charging to (at least) cover the costs of the input factors and of the transformation and selling process
What is “profit”?
- how do you calculate it ?
- on what is the business dependent to extend its profit ?
- what is the key takeaway
Profit = Revenues – Expenses
Profit = Price per Unit x Units Sold - Cost to make and sell
The extent to which the business is able to make larger profits depends on the specific market environment, in which the business operates, and how it operates.
Takeaway: The business tries to keep as much as possible of added value for itself in the form of profits.
What is the goal of a business ?
and how does it achieve it ?
Notes: Sell output products to customers & cover costs & sales.
The business would like to keep almost all the added value for itself in the form of profits.
The extent to which the business is able to make larger profits depends on the specific market environment, in which the business operates, and how it operates.
What is added value ?
How do you determine it ?
For a businesses to make a profit, it has to create added- value for customers –> No profit without added value for customers.
The business tries to keep as much as possible of this added value for itself in the form of profits.
Customers like to keep as much as possible of this added value for themselves in the form of ’value for money’.
The market environment, and the firm’s operation processes determine how much ‘added value’ is created, and how it is shared among economic actors.
Notes: Market environment (where business is placed) & Firm’s operation process (how to place in the market) define & create added value. Added value is the difference between Cost for producing/Selling and the perceived value.
What is a business model ?
What is a successful business model ?
It is a set of assumption or hypotheses about how you will make money in the market, and provides an integrated view on the key activities in your business
A business model is NOT a strategy! Notes: Because the was no reflection on competition and how to outdo the compettion
A successful business model represents a better way for the customer to get the job done, such that the firm makes a profit.
Notes: Product helps customer to get the job done in a better way
Which questions must a succesful business model answer?
A successful business model represents a better way for the customer to get the job done, such that the firm makes a profit.
A good business model answers who the customer is, what value you are generating for customers, how you make money, and how you can deliver customer value at appropriate costs
Questions:
- Who is the customer?
- What does the customer value? What is the job that the customer wants to get done? (VALUE PROPOSITION)
- How do we make money in this business?
- What is the underlying economic logic that explains how you can deliver value to customers at an appropriate cost? (Which more value do you offer to the market)
What is the value chain and from which perspective is it seen ?
The value chain is the sequence of activities a company performs to design, produce, sell, deliver and support its products.
Perspective: start from a customer’s job to be done, think about the (current) value chain configuration to get the job done.
Notes: The value chain combines all activities in the organization to get the job done.
