Data is important Quantitative or qualitative Doesn t always tell the same story Firms can be successful in some areas but not in others Monotonically smoothly increasing or decreasing Extraction of information of data making sense out of the data Financial data hard Revenue sales increase Net earnings accounting increase o Early years 4 5 cents per o Recent years plus or minus 6 8 7 cents per Net Earnings Revenue increase in cents per Marketing data o Number of stores advertising Operations o How efficient is your firm in using its resources o Proficiency of production Strategic data soft Performance of a firm o Econ maximize profit o MCE be everywhere Good CSR focuses on employees Successful company created the industry but problems coming up now o Competition too big too cookie cutter Future not easily predictable o Dead companies blockbuster blackberry Organization and firms Organizations World is full of organizations many types Characteristics of an organization o Boundaries External separates the organization from everything else in the world Internal separates one part of the organization from the other parts within the organization o GoalS Profit revenue expenses Wealth the accumulation of profit over time Instantaneous rate of change in wealth is profit All organizations have multiple goals o Deliberately structured sets of activities inconsistent Position Positions get labels su chef A position is not a job It s a set of activities Position person job o Social invention Firms All firms are organizations All organizations are not firms Subset of organizations 4 characteristics of organizations 3 extra characteristics o Legal existence and identity Sole proprietorship one owner Partnership Corporations Legal existence all legal stuff is at a state level Law varies state to state LLC States invent new legal structures for firms LLC limited liability corporation Rights and responsibilities GoalS is concerned with the accumulation of wealth Publicly or privately held market place Not sole proprietorship For profit or not for profit o Public ownership opportunities are available in the Environment Definition everything outside of the firms boundary In the environment of firm A is Firm B vise versa o o Every firms environment is unique o They don t compete against themselves Properties o Unique every firm has a different situation No level ground o Uncertain its difficult to product the future Many things effect uncertainty Drivers Few drivers simple dynamics Large drivers and dynamics are complicated Change Change Magnitude of change big small Rate of change slow fast Drivers cause change Dynamics are things that cause the drivers to change Un certain predictable random Independent knowledge of one event gives us no info on another o Ex war and weather have no control over Business environments are becoming more complex Managing No specific definition o Authority Decision rights what kinds of decisions can you make in your position Hiring manager pick who to hire Resource allocation rights anything that has value to the firm What position is a variable salary o Responsibility Obligations stuff in your position that you are supposed to accomplish Responsibility for self employee What you need to accomplish in this job Responsibility for others supervisor Get your tasks done coordinate allocate tasks to others and make sure their tasks get done Tactile business decisions manager Reoccurring standing problem that effects the business of the firm Standard problem standard solution criteria for solving the problem Heuristic standard solutions to standard problems that usually work New problems no heuristic Same problem heuristic doesn t work anymore Need new heuristic Strategic problems general manager Non reoccurring non frequent expensive o Standard MCE engaging in activities given responsibility and authority dealing with problems in a rapidly evolving environment Similar problems and solutions that may not work in the future GoalS Multiple goals o Entrepreneurs different people have different goals multiple goals priorities vary Be my own boss control Financial gain better opportunities Idea for product service that will be important o National cultural differences People in different places have different goals and their priorities differ US profit and environment preservation Japan moving forward as a community o Stakeholders Any party that has a vested interest in the firm Whoevers fate is linked to the organization EX entrepreneurs need money to start up business self investor banks Investor banks are more at risk its their money Profit is a scarce element If everyone got everything they want firm is dead Tournament strongest firm survives political process Political process that provides us a smaller set of stakeholders that controls who gets what dominant coalition o Does not always favor the owner Dominant coalition o Writes the goal agenda o Goals of the firm o How the profit stream is divided by establishing achieving goals Governance goal agenda of firm and dividing up the profit steam Profit Compare Time Revenue expenses profit Types generally different o Accounting looking back o Economic looking back and to the future o Tax Accounting Looking backward Fixed year and quarter Time value of money Opportunity costs NO NO Cost of capital NO except interest paid in the accounting period is counted Interest in the future is not counted Economic Looks back and forward Indefinite look as far back and forward as needed given the situation YES YES some opportunity costs cant be explained in economic terms YES Time value inflation deflation of money affects profit US usually 3 4 Opportunity costs when cant make an investment that will make X because you already spent Y on a different investment Costs of capital reflects the cost of debt and equity for financial reasons Interest of loans Accounting profit net income NI Economic profit rent or economic rent Accounting profit regulations legal RULES Varies by nation United States o SEC Securities and exchange commission Oversight for a firm gives rules report financial data Watches publicly traded firms 10 K techniqual annual report and 10 Q quarterly smaller and less complicated FINANCIAL DATA o Financial accounting standards board FASB International and US o Generally accepted accounting principles GAAP International and US Collection of principles of how to deal with specific things in specific industries Economic rules