Data is importantQuantitative or qualitativeDoesn’t always tell the same storyFirms can be successful in some areas but not in othersMonotonically – smoothly increasing or decreasingExtraction of information of data – making sense out of the dataFinancial data (hard)Revenue – sales increaseNet earnings (accounting) increaseEarly years – 4.5 cents per $Recent years – plus or minus 6.8-7 cents per $Net Earnings / Revenue = increase in cents per $Marketing dataNumber of stores, advertisingOperationsHow efficient is your firm in using its resourcesProficiency of productionStrategic data (soft)Performance of a firmEcon – maximize profitMCE – be everywhereGood CSR – focuses on employeesSuccessful company – created the industry but problems coming up nowCompetition, too big, too cookie cutterFuture not easily predictableDead companies – blockbuster, blackberryOrganization and firmsOrganizationsWorld is full of organizations – many typesCharacteristics of an organizationBoundariesExternal – separates the organization from everything else in the worldInternal – separates one part of the organization from the other parts (within the organization)GoalSProfit = revenue – expensesWealth – the accumulation of profit over timeInstantaneous rate of change in wealth is profitAll organizations have multiple goals (inconsistent)Deliberately structured sets of activitiesPositionPositions get labels (su-chef)A position is not a jobIt’s a set of activitiesPosition + person = jobSocial inventionFirmsAll firms are organizationsAll organizations are not firmsSubset of organizations4 characteristics of organizations + 3 extra characteristicsLegal existence and identitySole proprietorship (one owner)PartnershipCorporationsLegal existence – all legal stuff is at a state level (LLC)Law varies state to stateStates invent new legal structures for firmsLLC – limited liability corporationRights and responsibilitiesGoalS – is concerned with the accumulation of wealthPublicly or privately heldPublic ownership opportunities are available in the market placeNot sole proprietorshipFor profit or not for profitEnvironmentDefinition – everything outside of the firms boundaryIn the environment of firm A is Firm B (vise versa)Every firms environment is uniqueThey don’t compete against themselvesPropertiesUnique – every firm has a different situationNo level ground“Uncertain” – its difficult to product the futureMany things effect uncertaintyDriversFew drivers – simple dynamicsLarge drivers and dynamics are complicatedChangeChange –Magnitude of change (big – small)Rate of change (slow – fast)(Un)certain (predictable – random)Independent – knowledge of one event gives us no info on anotherDrivers cause changeDynamics are things that cause the drivers to changeEx – war and weather (have no control over)Business environments are becoming more complexManagingNo specific definitionAuthorityDecision rights – what kinds of decisions can you make in your positionHiring manager – pick who to hireResource allocation rights – anything that has value to the firmWhat position is a variable, salaryResponsibilityObligations – stuff in your position that you are supposed to accomplishResponsibility for self – employeeWhat you need to accomplish in this jobResponsibility for others – supervisorGet your tasks done, coordinate/allocate tasks to others and make sure their tasks get doneTactile business decisions – managerReoccurring, standing problem that effects the business of the firmStandard problem  standard solution  criteria for solving the problemHeuristic – standard solutions to standard problems that usually workNew problems – no heuristicSame problem – heuristic doesn’t work anymoreNeed new heuristicStrategic problems – general managerNon reoccurring, non frequent, expensiveStandardMCE – engaging in activities given responsibility and authority dealing with problems in a rapidly evolving environmentSimilar problems and solutions - that may not work in the futureGoalSMultiple goalsEntrepreneurs – different people have different goals, multiple goals, priorities varyBe my own boss / controlIdea for product / service that will be importantFinancial gain – better opportunitiesNational / cultural differencesPeople in different places have different goals and their priorities differUS – profit and environment preservationJapan – moving forward as a communityStakeholdersAny party that has a vested interest in the firmWhoevers fate is linked to the organizationEX – entrepreneurs need money to start up business (self, investor, banks)Investor/banks are more at risk – its their moneyProfit is a scarce elementIf everyone got everything they want  firm is dead“Tournament” – strongest firm survives – political processPolitical process that provides us a smaller set of stakeholders that controls who gets what  dominant coalitionDoes not always favor the ownerDominant coalitionWrites the goal agendaGoals of the firmHow the profit stream is divided (by establishing/ achieving goals)Governance – goal agenda of firm and dividing up the profit steamProfitRevenue – expenses = profitTypes (generally different)Accounting (looking back)Economic (looking back and to the future)TaxCompareAccountingEconomicTimeLooking backwardFixed (year and quarter)Looks back and forwardIndefinite (look as far back and forward as needed – given the situation)Time value of moneyNOYESOpportunity costsNOYES* (some opportunity costs cant be explained in economic terms)Cost of capitalNO* (except interest paid in the accounting period is counted. Interest in the future is not counted)YESTime 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 investmentCosts of capital – reflects the cost of debt and equity for financial reasonsInterest of loansAccounting profit – net income (NI)Economic profit – rent or economic rentAccounting profit – regulations/ legal  “RULES”Varies by nationUnited StatesSEC (Securities and exchange commission)Oversight for a firm – gives rules, report financial dataWatches publicly traded firms10-K (techniqual annual report) and 10-Q (quarterly, smaller and less complicated) – FINANCIAL DATAFinancial accounting standards board (FASB)International and USGenerally accepted