Appunti esame Management and principles of accounting

Management and principles of accounting

Lesson, 16 September

Business: individual organizations who try to earn a profit by providing products (goods,

services, ideas) that satisfy people’s needs with the goal of creating value for the entire

society/community.

Products: a good or service with tangible and intangible characteristics that provide

satisfaction and benefits.

Final goal of business: earn a profit: difference between what it costs to make and sell a

product and what a customer pays for it.

A business is divided into 3 different parts:

1.​ Finance to start activity → related to the owner

it is related to economy

2.​ Marketing to promote the activity → related to customers

it is related to digital technology and legal, political and regulatory forces

3.​ Management to control and administer the activity → related to employees

it is related to social responsibility, ethics and competition

also external factors influence the business: law, political and social and economics trends,

necessity of clients.

Stakeholders: groups that have an interest in the success and outcomes of a business.

Examples: employees, customers, suppliers, investors, local communities.

Lesson, 17 September

Where, why, how people start a business

Economics: the study of how resources are distributed for the production of goods and

services within a social system.

There are 3 resources with those we have to manage:

Factors of production:

1.​ Natural resources: Place, lands

2.​ Human resources/ labour → physical and mental abilities that people use to produce

goods and services.

3.​ Financial resources or capital*: money to start a business

Capital or financial resources: the funds used to acquire the natural human resources

needed to provide products.

The economic Foundations of business:

1.​ Input: any economic resource that creates outputs, or has the ability to contribute to

the creation of outputs, when one or more processes are applied to it. (Input: raw

product, that must undergo a processing phase in order to be sold)

2.​ Process: any system, standard, protocol, convention or rule that, when applied to an

input or inputs, creates outputs or has the ability to contribute to the creation of

outputs. (set of processes that, starting from an input, contribute to the creation of an

output). Many process can be followed, you have to define how to produce a define

product

3.​ Output: the result of inputs and processes applied to those inputs that provide goods

or services to customers, generate investment income or generate other income from

ordinary activities. (Output: final product to be sold to the client)

Many processes can be followed, you have to define how to produce a defined product.

The different alternatives of how to produce a product or a service are called the economic

system.

Economic system

: a description of how a particular society distributes its resources to

produce goods and services.

3 questions:

-​ What goods and services are useful and satisfy society?

-​ How to produce them?

-​ How to distribute them?

There are different kind of economic system:

COMMUNISM SOCIALISM CAPITALISM

Foundator: Karl Marx Robert Owen Adam Smith

Key idea collective ownership Mix of state and Private ownership

of all resources. private ownership and free market

no social classes

Business people own all the Government owns individuals own and

ownership nation’s resources, and operates basic operate the majority

central government industries but of business that

owns and operates individual own most provide goods and

most businesses, is business service

in charge of plans

production,

distribution, and

needs.

Profits Excess income goes Profits from Individuals are free

to the government government-owned to keep profits after

that supports social industries go to the paying taxes.

and economic government. Profits

institutions. earned by business

may be reinvested

in the business.

Product availability limited choice of presence of a wide choice of

and price goods. prices are choice of goods and goods and services.

high. services. Prices are prices determined

determined by by supply and

supply and demand demand.

Existence and Marx’s “ideal It exists in It exists in several

examples communism” has Scandinavian states: USA, UK,

never fully existed. countries Japan

Communism has

existed and exists

but it has a lot of

problems and it

doesn’t correspond

to Marx's idea.

(Soviet Union,

Cuba, North Korea)

Positive aspects Guarantee equality Very strong wealth unlimited choice of

programme, carers, possibility of

increase wellbeing economic growth,

of citizens, welfare market flexibility

programme

Problems low standards of higher taxes, higher social inequality,

living, shortages of unemployment rates labor exploitation,

consumer goods, than capitalism (no possibility of

high prices, incentive to work monopolies of big

corruption, little because the country corporations.

freedom, little choice supports lots of

in choosing a expenses), little

career, most people freedom for

work for the entrepreneurs. little

government. choice of careers.

2 kinds of Capitalism:

-​ Pure capitalism : free market system, no control of government for nothing

-​ Modify capitalism: government introduce regulations to control the market

Ex: control of difference between women and men

Mixed economies: economies made up of elements from more than one economic system.

The free Enterprise system

3 point to decide if a business is able to succeed or not:

-​ Business fail or success depends on market demand

⤷ efficient firms offering desired products → success

⤷ efficient firm or irrelevant products → failure

4 key rights to drive business motivation

-right to own property: I can choose because it is mine

-right to earn and use profits: free to decide to start another business, or to stop

-right to determine business operation: I can choose what to do to improve my business

-right to choose: career, location, goods, services

Fundamental elements in business:

Forces of supply and demand

Distribution of resources is determined by:

-​ supply: number of products (goods and services) that business are willing to sell at

different prices at a specific time

-​ demand: number of goods and services that consumers are willing to buy at different

prices at a specific time.

Supply and demand can be represented through 2 curves

The intersections of these two curves is the equilibrium price: the price at which the

number of products that businesses are willing to supply equals the amount of products

that consumers are willing to buy at a specific point in time.

Competition

:

rivalry among business : companies that produce the same products and identify the same

customers that they want to satisfy.

-encourages efficiency and low prices

-pushes firms to offer the best products at fair prices

-creates open markets and opportunities for all

4 types of competition:

1.​ Pure competition: many small businesses that sell one single products , this many

business are not able to offer so many products in the markets that can influence the

price of the products in the markets (example: agricultural commodities)

2.​ Monopolistic competition: fewer number of businesses in the market that provide

similar products, which can however be differentiated. (examples: soft drinks, jeans)

3.​ Oligopoly: very few business selling a product, if one of your competitor changes the

price of product you have to adapt otherwise you risk to lose customers (example:

airline industry)

4.​ Monopoly: only one business providing a product in a given market, in this case it is

really expensive to start the activity, so to enter in this market. Usually the

government tries to control the price and to limitate that. (Example: utility companies)

Cartel: group of firms or nations that agree to act as a monopoly and not compete with each

other, in order to generate a competitive advantage in world markets.

Economic cycles and productivity:

Economic expansions: the situation that occurs when an economy is growing and people

are spending more money, their purchases stimulate the production of goods and services,

which in turn stimulates employment.

(higher rating of employment, growing of economy, people buy more)

⤷ Rapid expansion bring to inflation: continuing rise in price

Economic contraction: a slowdown of the economy characterized by a decline in spending

and during which business cut back on production and lay off workers.

Economic contraction bring to:

⤷ recession: decline in production, employment and income

⤷ deflation: rising unemployment levels force prices downward

⤷ depression: very high unemployment, low consumer spending, reduction of

business output

How to measure economy:

Indicators of a nation’s economic health:

-​ Gross Domestic Product (GDP): the sum of all goods and services produced in a

country during a year. It measures only goods and services made within a country

and does not include profits from companies’ overseas operations.

-​ Budget deficit: the condition in which a nation spends more than it takes in from

taxes.

-​ Trade balance: difference between our exports and our imports.

Business ethics, social responsibility

Business ethics: the principles and standards that determine acceptable conduct in

business.

The acceptability of behavior in business is determined not only by the organization but also

stakeholders.

Business ethics is associated with the concept of business law

Business law: refers to the laws and regulations that govern the conduct of business

Social responsibility: a business’ obligation to maximise its positive impact and minimize

its negative impact on society

(all positive and negative effects of the business on society)

Social responsibility requirements:

1.​ Financial and economic viability: ensuring sustainable financial management.

2.​ Compliance with legal and regulatory requirements: adhering to all applicable laws

and regulations.

3.​ Ethics, principles and values: acting with integrity, fairness, and respect for moral

standards.

4.​ Philanthropic activities: engaging in charitable initiatives and contributing to the

community.

Social responsibility issues:

-​ sustainability

-​ consumer relations

-​ employee relations

-​ community relations

-​ relations with owners and stockholders

Reasons for and against social responsibility:

For Against

Improves company reputation and distracts managers from the primary goal of

performance business → earning profit and creating jobs

Business have the resources to address may give business too much power in social

sustainability, health and education matters

companies should support society through companies can be not so expert to handle

contribution to social classes social and economic issues

responsible decisions can reduce the need social problems should be government’s

for government regulation responsibility, not business’

Business ethics + Business law + Social responsibility → act as a compliance system to

make business and employees act responsibly in society.

Examples of unethical acts:

-​ Bribery: payments, gifts, or special favors intended to influence the outcome of a

decision. (in order to obtain favors or advantages in comparison to other

stakeholders).

-​ Misuse of a Company Time: engaging in activities that are not necessary for the

job.

-​ Misuse of company resources: excessive use of company resources for

employees’ own necessities and purposes. Examples: spending an excessive

amount of time on personal e-mails, submitting personal expenses on company

expense reports or using the company copier for personal use.

-​ Abusive and intimidating behavior: physical threats, false accusations, profanity,

insults, yelling, harshness, unreasonableness, ignoring someone or simply being

annoying. Bullying is associated with a hostile workplace when a person or group is

targeted and is threatened, harassed, belittled, verbally abused, or overly criticized.

behavior which is very difficult to evaluate, because in Base a colture alcune cose

sono positive altre sono considerate Negative

-​ Conflict of interest: an individual must choose whether to advance the individual’s

own personal interest or those of others.

-​ Plagiarism : the act of taking someone else’s work and presenting it as your own

without mentioning the source

-​ No honest communication

-​ Unfair competition

-​ Unethical business relationship: if you adopt ethical behavior, it will be more

difficult to earn, since there are no unethical expedients.

Three factors that influence ethical choices in business:

-​ Individual standards and values

-​ managers’ and co-workers’ influence

-​ opportunity: codes and compliance requirements

Code of ethics: formalized rules and standards that describe what a company expects of its

employees.

Contents of a code of ethics:

-​ promotion of values such as integrity, transparency, fairness and honesty between

colleagues, suppliers and business partners

-​ main guidelines to achieve organizational objectives in an ethical way

-​ company’s condemnation of plagiarism, corruption and bribes*; for example through

whistleblowing: the act of an employee exposing an employer’s wrongdoing to outsiders,

such as the media or government regulatory agencies

-​ confidentiality of clients’ data and informations

-​ respect through environment and community

*bribes: payments, gifts, special favors in order to influence the outcome of a decision

Importance of a code of ethics:

-​ it alerts employees about important issues and risks to address

-​ provides values such as integrity, transparency, honesty and fairness that give the

foundation for building an ethical culture

-​ gives guidance to employees when facing ambiguous situations or ethical issues

-​ helps establish uniform ethical conduct and values that provide a shared approach to

dealing with ethical decisions

-​ serves as an important document for communicating to the public, suppliers and

regulatory authorities about the company’s values and compliance

-​ provides the foundations for evaluation and improvement of ethical decision making

Corporate citizenship: the extent to which businesses meet the legal, ethical, economic,

and voluntary responsibilities placed on them by their stakeholders.

It involves the activities and organizational processes adopted by businesses to meet their

social responsibilities.

Example: CVS demonstrated corporate citizenship by eliminating tobacco products from its

pharmacies.

Environmental, Social and Governance (ESG) Framework → a framework that enables

the evaluation of a firm’s efforts to operate sustainably, contribute to social causes, and

engage in responsible and ethical conduct.

(reporting and measurement are not standardized → several organizations have developed

different frameworks with different criteria, and comparisons are not allowed because they are not

).

evaluated in the same way

Sustainability: conducting activities in a way that allows for the long-term well-being of the

natural environment, including all biological entities.

Lesson 22 September

International Business

International business : the buying, selling and trading of goods and services across

national boundaries.

Nations trade

⤷ Nations and businesses engage in international trade to obtain raw materials and goods,

that are otherwise unavailable to them or are available elsewhere at a lower price than what

they can produce.

2 kinds of nations trade:

-​ Absolute advantage→ a monopoly that exists when a country is the only source of

an item, or the most efficient producer of an item.

-​ Comparative advantage→ the basis of most international trade, when a country

specializes in products that it can supply more efficiently or at a lower cost than it can

produce other items. A consequence is outsourcing (when a company hires another

company to do work or provide services instead of doing it internally)

dumping : The act of a country or business selling products at less than what it costs to

produce them. It is usually practiced to enter in a new market or to eliminate competition in a

foreign market.

2 kinds of nations trade:

-​ exporting → the sale of goods and services to foreign markets

-​ importing → the purchase of goods and services from foreign sources

balance of trade: the difference in value between a nation’s exports and its imports.

⤷Trade deficit: when a country imports more products than it exports

⤷Trade surplus: when a country exports more goods than it imports

balance of payments: difference between the flow of money into and out of a country.

An important element to consider if you want to start an international activity:

International Trade barriers

-​ economic development: if a country has an industrialized market or less-developed

one, it is more difficult to enter into the market of a non industrialized county

-​ exchange rate: the ratio (rapporto/proporzione) at which one nation’s currency can be

exchanged for another nation’s currency

-​ ethical, legal, and political barriers: different laws and regulation; tariffs (dazi doganali,

taxes on goods coming from another country, they can be fixed: tax with a fixed amount of money for

each unit of a product (5 euro for each bottle of wine imported), or ad valorem: tax that is a percentage

and trade restrictions

of the product’s value (10% of the value of a car imported)) (commercio)

such as: import tariffs (a tax on the value of import to support more the local industries against

exchange controls

foreign ones), (Government rules that limit buying or selling foreign currency),

quotas (maximum number of goods allowed to be imported),

embargo (

total or partial ban on trade with a country).

-​ social and cultural barriers

-​ technological barriers: role of innovation in different countries.

Trade agreements, alliances and organizations: alliance created by countries to avoid the

international barriers

-​ General Agreement on Tariffs and Trade (GATT) → 1947, trade agreement that

provided a forum for tariff negotiations and where international trade problems could

be discussed.

-​ World Trade Organization (WTO) → 1955, international organization, it deals with

the rules of trade between nations.

-​ The European Union (UE) → 1958, union of European nations to promote trade

among its members.

-​ The World Bank → 1946, organization between industrialized nations to loan money

to underdeveloped and developing countries.

-​ The International Monetary Fund (IMF) → 1947, organization that eliminates trade

barriers and promotes financial cooperation.

How to get involved in international business:

-​ Importing goods from other countries for resale in its own business and country.

-​ Exporting goods to supply a foreign company with a particular product.

⤷exporting sometimes takes place through countertrade agreements: goods or

services are exchanged instead of using money. One country or company pays with products

.

or services rather than cash

3 kinds of international business:

-​ trading companies: they buy goods in one country and sell them in another country.

-​ licensing: licensor allows licensee to use his name, products, patents and

trademarks, in exchange for fees or royalties (tasse e compensi).

Example: Disney allows a toy factory to make Mickey Mouse toys. The factory pays

Disney to do it.

(lower level of freedom in comparison with franchising)

-​ franchising: a franchiser provides someone (franchisee) to open a store or business

using their brand, products, methods and advertising, in exchange the franchisee

pays a financial commitment and must follow standard operations → company’s

rules.

Example: McDonald’s lets a person open a McDonald’s restaurant. The person pays

McDonald’s and must use the logo, menu, and rules.

Transferring Business:

-​ direct investment: a company owns and controls facilities in another country, in this

case the company can manage the other company directly. (

example: a German car

company opens a factory in Mexico

-​ outsourcing: transferring manufacturing or other tasks to external companies in

countries where the labor and supplies are less expensive or there are more specific

skills. (

To assign your work (production or business activities) to another company, the other

company does the work for you.)

Example: a European company hires an Indian company to handle customer service in

English.

-​ offshoring: relocation of a specific part of the production project of a company to

another country while keeping it within your own company, to reduce expenses. (You

still own and control the work; only the location changes.)

Example: an American company moves its computers’ production to Vietnam to save money.

International partnership:

-​ Joint Venture: temporary partnership established for a specific project or for a

limited time. Both companies remain separate and independent but they create a

new temporary company and partnership to collaborate.

examples: Sony Ericsson (new partnership that shared profits, losses and controls of the new

partnership created, in which both companies contributed expertise, capital and technology)

-​ Strategic alliance: partnership formed to create a competitive advantage on a

worldwide basis. Two companies that create a partnership to provide a service which

is more completed, both remain separate and independent companies.

example: Spotify and Uber (Uber allowed passengers to listen to their Spotify music during

the ride, so they collaborated to offer a better service).

International business strategies:

Companies that operate in international business try to adopt different strategies. In the past,

they used a multinational strategy, but over time more and more companies are starting to

use a global strategy.

-​ multinational strategy: a plan, used by international companies, that involves

customizing products, promotion and distribution according to cultural, technological,

regional and national differences. (when you are in an international business, you

have to adapt your business and your products to different countries.)

(Multinational companies (MNCs): companies that operate in more than one country. They

have offices, facto