BUSSPP 0200 1st Edition Lecture 3Outline of Last Lecture I. Brainstorming: What’s happening?II. Analysis of stock III. Profit IV. Conclusion about Starbucks stock V. Take-awaysVI. Organizations and Firms Outline of Current LectureI. Organizations & FirmsII. EnvironmentsIII. Concepts of Management IV. Goals & StakeholdersCurrent LectureI. Organizations & FirmsA. Basic Characteristics: 1. Boundaries 2. Goals 3. Deliberately Structured sets of activities4. Social Inventions B. Additional Characteristics of Firms (besides those of organizations):1. Legal existence and Identity a. US – Legal definition is at the state levelb. Many different types of legal existence 9i. In all states: Corporations, sole proprietorships, and partnerships-sole proprietorship: owned by one personThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- One in the same entity - Person dies, firm is gone - Firm is sued, owner has unlimited liability-Partnerships: very complex depending on state law - Similar to a sole proprietorship, but with multiple owners - Unlimited liability of all owners -Corporations: Legally separate entity from it’s owners - Can outlive any one of its owners- Unless criminal activity is involved, owners have limited liability (suit against firm is not a suit against the owners) ii. LLC: limited liability company-Benefits of sole proprietorship (easy to set up/administer)-Legal protection against owners -May outlive ownersc. Not concerned with maximizing wealth (but you need enough to stay operating) i. Think of student organizations raising money (they don’t seek to maximize profit, just stay running and cover costs)d. Some Firms…i. public & private -IPO: initial price offering; process of making stock publicly available -If it is public, it’s definitely not a sole proprietorship-Corporations do not have to be public ii. For profit/not for profit -not for profit firms: make profit, but recycle it back into operation-exempt from many taxes/eligible for reduced taxes 2. Rights and responsibilities3. Some concern with the creation of wealth a. wealth: the accumulation of profit over time (profit = instantaneous change) II. EnvironmentsA. Everything that is not within the boundaries of the firm is its environment B. Properties 1. Uniquea. Every firm has a different environment at the most basic level 2. Environments are constantly in fluxa. Trendsi. Long-term-Speed at which technology advances-Deregulation (some flux in short term)-De-centralization of government control (Russia, China, India – added 2/3 of the world to the market)-Globalizationii. Short-term (some may transform into long-term)-tremendous migration to e-commerce - Within this: mobile commerce b. Conceptual Drivers Simple Dynamics Complicated DynamicsSmall ChangeLarge Changei. Change (assuming these are independent): -magnitude ComplexenvironmentIntermediatelyComplexEnvironmentIntermediatelycomplexenvironmentVERY COMPLEXENVIRONMENT-rate -predictability (systematic – random) ii. Drivers-few to huge #-Dynamics: what drives the drivers?- Politics (lobbying)- Social Trends- Economics c. Why is all of this important?i. If things change on a relatively constant basis, the future is increasingly difficult to predict-Implications: existing firms will fail -New opportunities can be pursued by existing firms and also new businesses II. Concepts of Management A. Authority 1. Who has what right to make what decision? 2. Who has what right to commit resources of the firm? a. Resources: money, people, time, space, ideas, technology B. Responsibility 1. What kind of obligations are you required to accomplish? a. Types of obligations: i. self (own work) -only responsibilities: typical employeeii. others-responsibility for both yourself and other: supervisoriii. tactical business problems -repetitive, common over time-heuristics: standard rules/processes of dealing with and evaluating the solutions to problems-responsible for self, others, and tactical decisions: manageriv. Strategic business problems -non-recurring (once a year, once every 5 years, decade…)-no well-established system, highly risky, significant commitment of resource, significant risk (can really benefit/harm the company)-responsible for self, others, tactical and strategic decisions: general manager**MCE Goals: how those in positions of tactical and strategic decision-making affect a company and its success II. Goals & StakeholdersA. Concept 1. In micro: one goal 2. in business: in practice, multiple goals B. Why?!1. Stakeholders: any party with a vested interest in the firm (somehow the firm’sfate and the stakeholder’s fate are intertwined)a. Types (all have different interests): -Employees-Owners-Debt holders -suppliers -Customers
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