Introduction to Business Management - Final

During this time, most business was dependent on transport by sea or land. With the rise of the industrial revolution, came an increase in manufacturing. This prompted the introduction of bonds and trusts. Bonds made trading much easier and more efficient. Trusts were a way to pool money together to invest in a business. This allowed for more people to invest in a business and made it easier to raise capital. This also allowed for the creation of stock exchanges.

As the world grew in complexity, a demand for managers arose. This led to the creation of management schools.

The foundation of conducting business is supply and demand. Business can be conducted in various markets, some of which include:

Monopoly

This is a kind of market with a single seller.

Oligopoly

In this market, there are a few sellers.

Monopolistic Competition

Here there are many unique sellers.

Perfect Competition

This is a market with many sellers, all of which sell identical products.

Each type of production has some optimal levels, if this level is exceeded, the the cost of producing more units grows as well.

This theory is based on the idea that the market is self-regulating. The man behind this theory is Adam Smith.

As the 1929 depression struck, it was clear that the classical theory was not working. This led to the creation of the keynesian theory.

This theory relies on the fact that the government should interfere in the market in order to regulate it.

Evolution of an industry is a result of innovation. The three key stages are: Variation, Selection, and Retention.

Variation

In this stage, a new product is created.

Selection

Now the product is tested (in the market) to see if it is successful.

Retenation

At this point, the new product that has been tested is being sold on the market.

Disruption comes when a new technology is introduced. This technology should be something which creates more value for the customer. This change causes a drastic shift in the market. This is not only the result of innovative disruption, it could also be a change in leadership. It could also be a change in the architecture of a business.

How do we disrupt

We combine similar elements in a different way and introduce new elements.

Incumbents are firms who ignore the disruption and continue to do business as usual. Disruptors are firms who take advantage of the disruption and change their business model.

Strategy is about winning in the market. The goal of a successful strategy is to create a sustainable competitive advantage. This means that we are able to grow more than our competitors. This is done by creating a unique value proposition.

We will also look at the blue ocean strategy.

Strategy can be done on two levels:

1. Corporate Level Strategy :: Here we decide in which markets we want to compete. How we want to diversify, integrate and expand. (What investors are interested in)
2. Business Level Strategy :: Here we decide how we want to compete in the market. We strive to find the competitive advantage. (

The economic logic is the value proposition of the business. This is the value that the business creates for the customer. This is the value that the customer is willing to pay for. This is the value that the business is able to capture.

This is a way of providing that unique value proposition. It focuses on four key elements:

1. Phases :: How do we plan our the project? What are the phases of the project?
2. Places :: Where will we sell? Who will we sell to?
3. Differentiators :: What makes us different? What is our competitive advantage?
4. Vehicles :: How will we get to where we need to be?

There are four main strategy archetypes: cost leadership, differentiation, focus. and stuck in the middle. These are based on the economic logic. The cost leadership strategy is based on the lowest cost. The differentiation strategy is based on unique value proposition. The focus strategy is based on specialization. The stuck in the middle strategy is based on average cost.

Cost Leadership

Our goal here is to minimize our costs. We can achieve this by economies of scale, economies of learning, production techniques, material costs, utilizing capital, efficiency.

Differentiation

We want to create a unique value proposition. We can differentiate by having more attractive cost leadership, this means we price our product lower than our competitors. Some more sources of differentiation are: product performance, complementary services, company procedures, localization, vertical integration.

Focus

We want to find a very specific market.

There are three main steps in strategy formulation:

There are three main steps in strategy development:

1. Sector Understanding (SWOT, 5 forces, etc.)
2. Positioning (Value Chain, Value Network, etc.)
3. Resource Development

Finding your place: If you cannot compete with the current market, you may want to consider creating a new market. This is called blue ocean strategy.

This is a tool which we can use to analyze a company. It relies on four key elements: strengths, weaknesses, opportunities, and threats.

It is usually done by looking at the internal and external environment of the company and analyzing the negative and positive parts. Here is the SWOT matrix:

How does this model work? It considers each of the forces, and determines the vulnerability or strength of the company.

Threats of new enterants

This force considers the possible threat of new companies entering the market. What this is based on, is the entry barriers for the given market.

Buyer Bargain Power

For this force, we determine consider the number of buyers and the importance of the buyers. From this, we can determine the bargaining power of the buyers.

Supplier Bargain Power

For this force, we determine consider the number of suppliers and the importance of the suppliers. From this, we can determine the bargaining power of the suppliers.

Threat of Substitutes

This force considers the threat of substitutes in the market. This is done by looking at the substitutes, switching costs, and buyer information.

This is a tool which we can use to analyze a company. It relies on four key elements: Mission, Objectives*, strategy, and Tactics.

Mission

The purpose and definition of the company.

Objectives

The goals of the company. We must be able to measure these.

Strategy

The way we are going to achieve our goals. We should be able to track this.

Tactics

Next steps for implementing our strategy.

Here is an example of a MOST analysis for Google:

Mission

To organize the world's information and make it universally accessible and useful.

(no term)

Objectives

• To provide the best search engine.
• To provide the best advertising platform.
• To provide the best cloud computing platform.

(no term)

Strategy

Search Engine

To provide the best search engine, we will use machine learning to improve our search engine.

Advertising Platform

To provide the best advertising platform, we will use machine learning to improve our advertising platform.

Cloud Computing Platform

To provide the best cloud computing platform, we will use machine learning to improve our cloud computing platform.

(no term)

Tactics

Search Engine

We will use machine learning to improve our search engine.

Advertising Platform

We will use machine learning to improve our advertising platform.

Cloud Computing Platform

We will use machine learning to improve our cloud computing platform.

It is a chain which describes the process from the point of gathering resources all the way to selling the product. What makes this important is that it helps us identify our primary and secondary (support) activities.

All companies will reach points when they have to re-engineer their business processes. This is because the world is changing, and the company needs to adapt to the changes. BPR makes a company undergo drastic changes, hoping to improve: quality, output, costs, service and speed.

This is a digital system which improves the functioning of a company by: imporving communication, improving efficiency, and improving productivity. It is a system which helps a company to manage its resources.

This is a cycle which describes four distinct stages of a product. These are: introduction, growth, maturity, and decline.

Introduction

You try to educate the market about your product.

Growth

Now that people, know about your product, you try to increase your sales. You are also trying to build brand loyalty.

Maturity

Given that you now have loyal customers and a successful product, you to try to maintain your sales. You might also try to improve your product.

Decline

Now the market has become a lot more saturated, and your product is starting to lose its appeal. You might try to re-invent your product, or phase it out. The key part of this stage is that you try to milk your brand, and get as much money as you can.

With this model, we can correlate the different stages of the product life cycle with how market growth and market share are changing.

A key takeaway from this is that if you have a product which is in the cash cow stage, you should invest the money into a question mark product. This is because the cash cow product is in the decline stage, and you should try to phase it out.

This is a model which can help us analze our strategy for growing.

We can look at the market and the product to determine the strategy. It is also important to try to make the business as synergetic as possible.

Vertical Integration

A process of taking up more space in the chain. This can be done by buying the company which either provides some resources or sells the product.

Horizontal Integration

Here we try to occupy more space on the same level of the chain. This can be done by buying a company which is in the same stage of the value chain. The key objectives here are to increase the control of the company, and to increase the synergy of the company.

It is not necessary to always make everything yourself, you can outsource a lot as a company. The key decision is to make sure your core competencies are not being outsourced.