BUSS1001 Understanding Business
Week 2: What is Business? Associate Professor Philip Seltsikas Associate Dean (Undergraduate)
THE UNIVERSITY OF SYDNEY
BUSINESS SCHOOL
Preview of today’s lecture
›What is Business? - Narrow view - More complex view ›Assessment 1
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What is business? The narrow view
›‘Any activity that seeks to provide goods and services to others while operating at a profit’ (Nickels, McHugh and M H h 2010 p. G 14) d McHugh 2010, G-14).
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Total returns on assets must exceed cost of capital required to finance assets http://en.wikipedia.org/wiki/Max_Weber http://en.wikipedia.org/wiki/Scientific_management
Reinvestment Returns
Reinvestment
Returns
Assets
Debt Equity
The Value Creation Equation A ‘model’ of all businesses
Assets
› 1841-1925 Henry Fayol Founder of Classical Management Theory
› 1856 – 1915 Frederick Taylor Developed ‘scientific management’
› 1864 – 1920 Max Weber Studied organizational bureaucracy
Fayol, Weber, and Taylor
All capital is a costly resource
Debt
Equity
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What doesn’t this model show us?
WHAT?
Organizational building blocks
› › › › Mission, Vision, Goal, Purpose Strategy Collection of assets Configuration of Assets - into a structure (s) - to enact business processes Management (decision making & control) - using structure - using policies & procedures - using rewards & punishments
DON’T NORMALLY SEE DON’T NORMALLY SEE
›
Where did these companies come from?
WE SEE SOME OF THESE or ASPECTS OF THEM M
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Someone is at the controls – Keeping it running and navigating the environment
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What is a BUSINESS?
› ‘Structure’ – multiple meanings › This is ‘part of’ understanding Business Structure › Organisational Structure will help us understand: ‘What is a Business’?
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Dimensions of Organizational Structure
› › › › › › Job specialization Departmentalization Span of control Chain of Command (c.f. hierarchy) Line functions and staff functions (front office/back office) Power and authority
› ›
Divisionalization Centralization / Decentralization
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Organization Chart
CEO
CFO
CIO
COO
Marketing Director
IT Manager
Sales Director
Production …show more content…
Manager
Marketing group A
Marketing group B
IT department
Sales region A
Sales region B
Plant workers
French & Raven 1959 5 bases of organizational power
› Coercive Power › Reward Power http://www.carrollcoaching.com/coaching › Legitimate Power › Referent Power › Expert Power
Functional Organization Measures of Success?
› Profit › Market Share › KPIs (key performance indicators)
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Inside and Outside Perspectives › Organisations are subject to external forces but may also influence the operation and effect of those same forces.
› Key aspects of the capacity of organisations to effectively shape their own destiny include the decisions that they make about: k b t
Strategy Structure; and
BUSS1001 Understanding Business
Behaviour
BUSS1002 The Business Environment
Business: key player in society
• Is a major change agent • Has the potential to be a ‘force for good’ g prosperity • Drives growth and p p y
Society
• Impacts on business • Is constantly changing and so, must business change • Affects what businesses do and how they do it
What is business? A broader perspective
›Transformation of inputs into outputs to produce goods and services that meet needs and wants in the society [adapted from Wetherly and Otter 2011]
For-profit businesses Private P i t sector t Types of business activity Public sector Non-profit organisations Government organisations
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Purpose of a ‘For-profit’ business organisation
›Maximising returns on debt and
equity
›This is achieved through sustainable competitive titi advantage
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Sustainable competitive advantage
›Outperforming your competitors in the long run ›How is this done?
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Next week
What? Why?
Strategy
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How?
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