Appunti Fondamenti Business Policy

Fundamentals of Business Management

UNIT 1

System: sets of elements which are related.

Organization: open system.

What is management?

Management as a universal human activity occurs whenever people take

responsibility for an activity and consciously try to shape its progress and outcome.

Management as a distinct role develops when activities previously embedded in

the work itself become the responsibility not of the employee, but of owners or their

agents.

Management is

An activity which is aimed to achieve certain objectives and that consists on

 organizing and coordinating resources to create value

Value for costumers / users

o Value for owners / investors

o Value for other stakeholders

o

It entails making decisions, planning, organizing and controlling the evolution

 and results of the activities

Tasks: Plan, control, organize and lead. What organizations do has an impact on the

environment. Organizations not only provide goods but also growth, reputation.

Organizations

Organization: group of people, use of resources, organized in a certain way to achieve

a common objective.

Dimensions:

Technical: they provide a service/good using their knowledge

 Sociological: there are people behind the organization

 Economic: different between organizations and other systems. Everything we do

 has an economic implication. All the resources have a cost. The value an

organization creates provides a benefit.

Organizations/companies

A company is a technical and economic unit because transforms resources in

 products or services (technical function). In this transformation, an economic

value is generated (economic function).

A company is a socio-political unit because it is formed by people. Decisions and

 objectives are determined by using political processes.

A company is a decision unit, because a person or a group of people (owners

 /managers) are concerned to establish a structure and formal relations in order

to achieve the set objectives

Management in different organizational settings

High-tech companies: invest a lot of money in new projects and don’t know if they are

going to work.

When the business operates internationally the needs are different. The conditions of

management are more complex.

Dimensions

Economic criteria

Size: small, medium and large

 Activity: primary sector (activities which work with raw materials), secondary

 sector (take the raw materials and transform them into goods) and third sector

(provides services).

Scope: have many countries are you present in or how many activities you do.



Legal form: how the company is registered. Different rights and different obbligations.

Dimensions/criteria useful to characterize organizations

Partnerships: several people join forces and respond together without limits for the

activity (unlimited liability).

Cooperative: people work together but the profits aren’t shared but reinvested. No

dividend.

Types of Companies/Business Organizations

The main variable are the employees. To be a type you have got to fulfill the condition

of the employees and one condition of the other two. You have to fulfill 2 conditions to

be a certain type of company.

Organizations may be studied as systems

Open: it interacts with other systems (other organizations, environment,

 customers).

Artificial: it is created by humans.

 Social: there can be issues related to society.

 Technical: there has to be a transformation



Organizations as systems

System’s characteristics

Have/pursue an aim

 Globality. Actions in one part of the system will affect other parts of it

 May have hierarchical relationships with other systems, and may be formed by

 subsystems

Its components create synergies by combination



Type of systems

Closed vs. Open

 Natural vs. Artificial

 Social vs. Technical



Open systems interact with their environment: they import, transform and emit some

energy to the environment. One of the imported inputs in open systems is the

information or feedback, which allows their operation and control.

Equifinality: they can achieve the same goals through different paths

Every system has several characteristics, one of them is globality: if you affect one

part of the system, this will be reflected on other parts of the system, for good or for

bad. Everything is related. In most system there are subsystems (supplying,

production, marketing, Finance, Human Resources, Research and Development,

General Management).

The management subsystem is responsible of the global performance of the

organization. It organizes and coordinates the other subsystems in order to achieve

the company’s objectives. It combines different perspectives (technical/economic,

sociology and psychology).

Synergy: the result of a combination is going to be different than the result of the

different activities separated. A combination can lead to a better or worse result.

Typically, if the synergy is negative the system doesn’t survive.

UNIT 2

Management subsystem:

Responsible of the global (general) performance of the organization

 Organize and coordinates the other subsystems in order to achieve the

 company’s objectives

Combines different perspectives: technical/economic, sociology and psychology



Businessman/woman, Top Management Team and Corporate Governance

70% of companies have an owner that is also a manager. 68% owner (100%

Unique

of the shares) and CEO of the company.

Knight: the businessperson is the one who takes the economic risk and puts the

money. More economically.

Schumpeter: focus on who is taking the entrepreneurial attitude. The businessperson

is the one who discovers opportunities, is an innovator and also takes risk.

In reality they’re mixed. One could be more focused on taking the risk than to create

opportunities or the other way round.

In 1967, were corporations started to grow (first multinternationals ecc.), Galbraith

came up with a new theory. He thought the management function is performed by a

group of people which are trained and expert. Some of them will be more

entrepreneurial and some of them will be more conservative. If you are very

entrepreneurial sometimes you take more risks that you should, therefore it is

necessary to have also more conservative professionals.

In reality, we find different profiles. Types of business actors:

Businessperson: owner, risk taker and decision maker.

 Owner: risk taker, shareholder in a corporation.

 Entrepreneur. Those who start a business trying to take profit of innovations or

 opportunities. People who start a business.

Intrapreneur: those who lead innovations within a corporation, without being

 owners or investors.

Manager/executive: decision maker, expert.



Current interpretations

The entrepreneurial orientation depends on the personality of a person.

Management – tasks

Management: constitutes the coordination and integration of work and activities of an

organization addressed to create value. It must be efficient, effective and ethical.

Management roles

Informational roles

Monitoring: collecting information they need in order to make decisions

 Disseminating information within the organization: in order to organize, give

 orders.

Spokesperson: they talk in the name of the organization.



Interpersonal roles

Leading: advice, influence people in the organization to do thing using formal or

 informal sources.

Liaison

 Figurehead: representation from a symbolic point of view.



Decisional roles

Entrepreneur: innovate, invest, decisions about new initiatives

 Disturbance handler: takes actions to solve a situation, resolving conflicts

 Resource allocator: where to put the money and the people. Remove resources

 from one place and move them to another one if necessary

Negotiator: negotiate with competitors/other managers/customers



We should add some technological skill as our generation is getting more and more

dependent on it.

We find those managerial roles everywhere in the organization.

- Upper Echelons

- Middle Management

- Employees

Management actors at different levels

65% of the companies in Spain: 100% owner, Sole administrator, General

Manager/CEO

The owners nominate the Board of directors: monitors what the organization does,

is legally responsible for the behavior of the organization. They’re responsible for the

company.

Below the Board there is the Top Management Team. They perform the managerial

function every day. Below them there is the Middle Management.

We need management teams when the company’s size is important or when there is

complexity (ex. Being listed, turbulent environment). When companies are complex,

they need more than one person to monitor the situation.

Top Management Team: people with managerial responsibilities. They participate in

the processes of analysis, alternatives generation, and decision making.

Every person makes decisions based on their perception of reality. It is better to

perceive reality as a team, as it will be closer to the real reality.

Central role of the CEO: Leader, Cohesion, Mobilize, Facilitate. Main responsible for the

performance and efficacy of the group and the company.

Corporate governance

Corporate governance is, “the framework of rules, relationships, systems and

processes within and by which authority is exercised and controlled in corporations.” It

encompasses the mechanisms by which companies, and those in control, are held to

account. Corporate governance influences how the objectives of the company are set

and achieved, how risk is monitored and assessed and how performance is optimized.

Why it is necessary?

Agency problem: Separation of ownership (principal) and the control of

 operational processes (agent)

Globally responsible principles of management (monitoring the interests of all

 stakeholders)

Level of the Board of directors/administrators. Takes care that the company is

managed properly and in the right way. Important to avoid that potential problems

appear (for example opportunistic management).

To provide an adequate monitoring process of management action, governance

systems must have:

An adequate system of internal controls that safeguard the firm’s assets

 Mechanisms to prevent that certain people gain too much power or influence

 Processes for managing relationship among directors, advisors, shareholders

 and other stakeholders

The central purpose of managing the company in the interest of the

 shareholders and the key of stakeholders

The purpose to increase transparency and accountability dation according to

 the expectations of investors and other stakeholders of the company

Shareholder: own the company

Stakeholder: whoever may be interested in what the organization is doing

Governance structure in cooperative companies

Members: second degree cooperatives

The general assembly names a board.

One member-one vote.

They also name an auditor and allocate the managerial positions.

UNIT 3: The business environment

Environment: factors which are out of control of the company

The concept of environment

What is the business external environment?

We refer to those factors that

 are external to an organization

o cannot be managed or controlled by the organization

o have a significant impact in the activity or results of organizations

o

How is currently the external environment of organizations?

Complex. Many factors do affect organizations and they are highly interrelated

 among them. Organizations today operate in a very complex system (social,

natural, politics, unemployment, taxes etc.). Currently the environment is more

complex than before because the countries are more interconnected and what

happens in one place has its effect on other countries too.

Dynamic. Factors change quickly and changes may be of high importance

 Uncertain. It is difficult to anticipate how these factors will evolve and how they

 will determine the future conditions, we can’t know what’s happening in the

future (ex. How will technology evolve?). Managers have to consider the long

term and how to survive and be profitable in the long term. Environment is

every day more uncertain.

One should try to improve every day and build up a strategy for the future.

Environmental influences

General environment

Identifying environmental influences – PESTEL analysis

How do you get a global picture? You need a framework to analyze the general

environment (economic, legal, political, socio-cultural factors).

Political

Governments shape what business can do

 Taxation, pollution and regulation

o

Businesses lobby to influence government.



Economic

Wealth and stage of development

 Wage levels, interest rates and consumer confidence

o Managers compare relative attractiveness of countries for their business

o

Social Demographic trends, family structures consumer tastes, ‘Grown Up Digital’.

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